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News Navigator: What is the Innovation Network Corporation of Japan (INCJ)?

Troubled electronics giant Toshiba Corp. announced on June 21 that it had chosen a Japan-U.S.-South Korea consortium, which includes the state-backed Innovation Network Corporation of Japan (INCJ), as the preferred bidder for its chip business. The Mainichi answers some common questions readers may have about the INCJ.

Question: What kind of organization is the INCJ?

Answer: The INCJ is an investment fund that was set up jointly by the government and industry in 2009 to boost growth through investing in enterprises leveraging innovative technology from academia and the private sector. To date, the government has injected 286 billion yen, while 26 firms including Toyota Motor Corp. and Hitachi Ltd. have invested a total of 14 billion yen into the fund, which has a duration of 15 years. In addition, the government guarantees up to 1.8 trillion yen for INCJ investments, giving it an investment capability of approximately 2 trillion yen.

Q: How does INCJ decide which enterprises to put money in?

A: There are several criteria such as response to social needs, the likelihood of achieving long-term profits, and the innovation level of the technology and business models. At the end of each month, the INCJ's Innovation Network Committee is convened to discuss which enterprises should receive investment. However, as it is a fund, the relevant enterprise's shares must be sold off after a set period of time, and the money recouped. Much of the capital for the investment fund is provided from tax revenues, and if an enterprise that has received investment fails, the public effectively carries the burden. Therefore, it is vital that the committee judges very carefully when it comes to deciding which enterprise the INCJ should invest in.

Q: What has the investment been like so far?

A: As of the end of May, a total of 986.9 billion yen had been invested in 116 different enterprises. The enterprises that have received funding vary, and include IT firms developing artificial intelligence (AI) technology. In addition, the INCJ has helped out with industrial reorganization. For example, the INCJ invested in Japan Display Inc. (JDI) -- an LCD technology joint venture established by merging Sony Corp., Toshiba Corp., and Hitachi Ltd.'s LCD units. In 2015, the INCJ tried to buy Sharp Corp. when it was struggling financially, though the fund was ultimately beaten out by Taiwanese firm Hon Hai Precision Industry Co., a core company in the Foxconn Technology Group.

Q: The INCJ seems to be intent on buying Toshiba's semiconductor unit for 2 trillion yen. Is this feasible?

A: Given that the INCJ will team up with other firms, such as a U.S. fund and the government-backed Development Bank of Japan, as part of the consortium, it is anticipated that it will put up approximately 300 billion yen. Still, since it is a massive amount, accountability may be demanded. (By Yuki Ogawa, Business News Department)

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