Japan Investment Corp. urged to seek approval from industry ministry for each investment

The industry ministry has urged government-backed Japan Investment Corp. to seek its approval for each of its investments, according to informed sources.

But JIC claims such an approval system would make it difficult to make quick investment decisions, according to the sources. Concerns are also emerging that the public-private investment body may be used for unnecessary corporate bailouts, they said.

The ministry’s move has come to light just as its relations with JIC are deteriorating over executive pay at the investment body.

The ministry made the demand last month, along with a request to lower compensation for JIC executives including President and Chief Executive Officer Masaaki Tanaka amid criticism that they are paid too much.

The ministry also urged JIC to prioritize investment in infrastructure, natural resources and other projects over stock, bond and foreign-exchange trading, as well as to refrain from speculative dealing.

JIC was established in September, following a revision to the industrial competitiveness strengthening law, with the mission of providing capital for growth to startups and others via domestic and foreign investment funds.

In the meantime, competition to take stakes in promising firms with cutting-edge technologies is intensifying, making swift investment decisions crucial to gaining high returns.

The ministry initially adopted a system to leave individual investment decisions to JIC.

The ministry is now pressing the body to introduce a process of seeking ministry approval for each investment, while suggesting a possible cut in government contributions to the body. The ministry is also poised to consider replacing the current JIC leadership if it rejects the demand.

The possible ministry action, however, could keep JIC from proceeding with existing investment projects, industry sources said.

In October, JIC concluded a contract with local partners on a plan to invest up to $2 billion in the U.S. biotechnology industry. JIC is concerned that it could face a damages lawsuit if the project is delayed.

The spat between JIC and the government, if prolonged, would damage the international reputations of both sides, industry sources warned.

“Repeated rule changes by the Japanese government would discourage potential partners of JIC,” an investment firm executive said.

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