PE firms call for limit on Japan's government-backed funds

The Japan Private Equity Association (JPEA) - which counts a host of global and local PE firms among its members - says that government-funded entities, such as Innovation Network of Japan (INCJ) is squeezing out opportunities for private capital and delaying the restructuring of ailing companies.

In a statement, the JPEA added that without new controls, government funding could allow companies to "push back problems" and "retain idle assets."

The association has called on the administration of Prime Minister Shinzo Abe to set up a monitoring system on the return on government funds and to limit both the amount and period of their investment. "Policy-driven finance and government capital should be supplied only to attract private-sector funds, and should be invested with appropriate governance and accountability," it said.

The remarks come just months after INCJ bailed out chipmaker Renesas Electronic Corp to the tune of JPY150 billion ($1.8 billion), frustrating plans by KKR to invest JPY100 billion in the company.

Enterprise Turnaround Initiative Corporation of Japan (ETIC), another government-backed fund, invested in ailing Japan Airlines in 2010, dashing the hopes of a joint bid launched by TPG Capital and American Airlines Capital.

Japan's largest state-backed funds have the capacity to raise up to $37 billion to inject in local companies. INCJ and ETIC can call on government-guaranteed financing of JPY1.8 billion and JPY1.7 trillion, respectively.

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• Topics
• North Asia
• Buyouts
• Buyout
• Japan
• KKR
• The Carlyle Group
• Bain Capital Asia
• Japan Private Equity Association (JPEA)