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METI Releases Report compiled by Study Group for Risk Capital Supply for the Fourth Industrial Revolution

June 29, 2018

The Ministry of Economy, Trade and Industry (METI) established the Study Group for Risk Capital Supply for the Fourth Industrial Revolution in October 2017. METI hereby releases a report summarizing discussions by the study group.

1. Background

As the advancement of innovative technologies such as IoT, big data and AI, which is referred to as the Fourth Industrial Revolution, is bringing about changes in the structure of industries around the globe, methods of supplying risk capital based on the general thinking towards taking high risks in the long term are also changing significantly, with the roles of both sovereign wealth funds (SWFs) and public pension funds expanding.

In light of this circumstance, METI established the Study Group for Risk Capital Supply for the Fourth Industrial Revolution in October 2017. Since its establishment, the study group held discussions in order to clarify the challenges concerning risk capital both inside and outside Japan and to formulate measures to overcome such challenges.

2. Clarifying the challenges

Amid intensifying global competition with the progress of the Fourth Industrial Revolution, companies that successfully dominate global markets and create new industries notably tend to be those that achieve dramatic growth through making bold business decisions and revising and strengthening their business portfolios. Conventional methods of selecting prospective businesses and fields and transferring resources to them are no longer effective in enabling companies to catch up with rapid global economic growth driven by the large amounts of risk capital in circulation. Furthermore, it is pointed out that companies now need to have authentic power for management and good governance to properly utilize risk capital for their growth and to accelerate rejuvenation.

The Study Group ascertained such circumstances based on a wide variety of data and discussed the challenges and subsequent measures for Japanese companies in order to attract global risk capital as the source of their growth and strengthening their investment chain that supports strategic investment (a series of routes and parties leading to business investment that starts from contributors of risk capital). Additionally, the Study Group discussed means of strengthening companies' ecosystems as a whole including the development of human resources and intellectual property infrastructure bases indispensable for their dramatic growth, and not limited to fund procurement.

3. Issues

The Study Group focused on the global flow of risk capital and major players in the investment chain that supports the former and discussed the following concerning each of the suppliers, intermediaries and beneficiaries (investment destinations and managerial personnel) of risk capital, while giving due consideration to close mutual collaboration among them.

4. Future Directions

Based on these discussions, the Study Group report presents the following as future challenges and directions.

5. Schedule

Based on the Study Group report, efforts will be made to establish and implement concrete measures.

Appendix

Division in Charge

Industrial Revitalization Division & Industrial Finance Division, Economic and Industrial Policy Bureau

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