Floundering Cool Japan Projects See Loss After Loss
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“Cool Japan” refers to the allure of Japanese culture, both traditional and popular, that appeals to people around the world. The Japanese government has appropriated the term as a part of its “soft power” strategy and a way to boost the country’s economy. However, a string of joint public-private projects established to help promote the concept of cool Japan continue to experience losses and mismanaged investments.
Cool Japan Fund Experiences Heavy Losses
Located on the seventeenth floor of the Mori Tower in Tokyo’s Roppongi Hills Tokyo is the Cool Japan Fund, a company established as an entity to help promote food, anime, and other Japanese exports. “Cool Japan Fund” is a direct translation of its nickname—its actual name translates from the Japanese to “Overseas Demand Development Support Fund.” The firm was established in November 2013 with joint funding from the public and private sectors, its goal being to commercialize the alluring nature of Japan’s unique culture. To date, the company has come up with 29 different investment projects totaling ¥62 billion, of which ¥58.6 billion, 85% of the total, comes from public funding. It is increasingly clear, though, that many of these Cool Japan initiatives are suffering substantial losses.
A Department Store Setback in Malaysia
In October 2016, Japanese department store operator Isetan launched the Japan Store, a Japanese-style high-end retail outlet, in Kuala Lumpur. Located in the largest shopping district of the Malaysian capital, the center was jointly funded by the Cool Japan Fund and Isetan Mitsukoshi Holdings, with the former providing ¥970 million and the latter ¥1.1 billion, a nearly 50-50 split.
However, the store has continued to struggle against local competitors, with its pricing leading to meandering sales and increasing deficits. Amid this quagmire, Cool Japan chose to unload its stake of the operation to its partner in June 2018, just a year and a half after it opened. Isetan Mitsukoshi is now drawing up plans to revamp the Kuala Lumpur facility.
A government official spoke with FNN about what led to this decision.
“When the fund first launched, it prioritized setting a track record of good investments. The Japan Store project was the result of the Cool Japan Fund and Isetan Mitsukoshi presidents at the time being on good terms with each other, which allowed the two companies to come together and work on this project.
“Once the president of Isetan Mitsukoshi changed, though, Cool Japan felt it was time to put an end to its involvement.”
While the cost recouped by the Cool Japan Fund by selling its shares has not been made public, it is projected to be significantly less than the initial outlay.
Government-Funded Film Company Sees Zero Output
The film industry, too, has seen its own Cool Japan flop.
In October 2011, prior to the Cool Japan Fund’s launch, a company known as All Nippon Entertainment Works took shape in an attempt to get more Japanese cultural properties adapted into Hollywood movies. ANEW was established with 100% of the ¥2.22 billion investment coming from the Innovation Network Corporation of Japan, a firm operating under the jurisdiction of the Ministry of Economy, Trade, and Industry.
While ANEW announced seven film projects it was pursuing, not one ever came to fruition. The organization was eventually sold to a Kyoto-based venture capital firm in June 2017 for ¥34 million, a mere 1.5% of the original investment.
Shimizu Takayuki, a member of the House of Councillors from Nippon Ishin no Kai (the Japan Innovation Party), has taken it upon himself to investigate the ANEW case. He has questioned the necessity of government funding for the company. “ANEW executives, after selling off their shares, went on to start a new company and are continuing to pursue the same sort of projects. Was it really necessary for the government to provide funding to a company that could have existed solely within the private sector?” Shimizu goes on to point out: “The Cool Japan Fund has yet to make public its profits and losses regarding projects now being funded; these projects are moving forward unchecked.”
Moving Toward Transparency
In April, the Board of Audit announced the results of an investigation into investment gains and losses on the part of joint public-private projects.
The investigation revealed that as of the end of March 2017, out of 17 projects that the Cool Japan Fund had invested in, approximately ¥4.5 billion of a total of ¥31 billion in investments had been lost. The Board of Audit states it is looking into these matters in an effort to establish public transparency and to seek accountability on the part of companies like Cool Japan, pressing them to provide the public with as much information as possible in regard to their investments.
The Cool Japan Fund is required by law to cease all activities by the year 2034, and has a long-term target of breaking even in terms of profitability. However, amid rumors of the INCJ and Cool Japan integrating into one organization, it appears that the latter may vanish without any of the results of its investments being verified.
With multiple projects still in the works, at this stage no final call can be made on the organization, but many are calling for the results of individual business ventures to be properly analyzed and the appropriate information to be released to the public, especially considering the large sums of public funding in use.
(Originally published in Japanese on FNN’s Prime Online on July 13, 2018. Text by Fuji TV political correspondent Itō Satoshi. Translated by Nippon.com. Banner photo: Cool Japan Fund CEO Ōta Nobuyuki speaks at the launch ceremony for the organization on November 25, 2013. © Jiji.)
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