Q&A: Media's central role at the Cool Japan Fund

The Cool Japan Fund was initiated in 2013 by Japan’s powerful Ministry of Trade and Economy in the face of decreased domestic demand and the popularity of Japanese culture overseas, (content, food, fashion, lifestyle and tourism). The fund focuses on supporting small and medium sized expand their businesses overseas while promoting Japanese culture. It does this by providing financing as well as practical assistance with building overseas operations and obtaining market access.

Since its establishment, the fund has attracted criticism, in some cases for not being active enough in promoting Japan’s interests, in others, for exploiting culture. Be that as it may, Cool Japan is actively seeking partnerships in the media space, and recent initiatives show its potential to help expand the audience for a particular content type and support infrastructural advances in developing countries.

In this Q&A, the fund's managing director, Ken Matsumoto, explains how he hopes supporting international content and media properties will also help make Japan more competitive.

What exactly is the Cool Japan fund?

The Cool Japan Fund itself was established in 2013 by as a public-private investment fund [by the Ministry of Economy Trade and Industry]. The goal of the Japanese government is to support activities by Japanese companies or Japan product-related services in overseas markets. Our secondary goal is to get some return on our investments economically. 

We see more Asian competition. The buying power of the Japanese people is declining. We need to help Japanese companies and Japan-related products tap overseas markets.

What do you do at the fund? 

I work to find candidate companies for investment and on our investment executions, including due diligence and negotiating terms and conditions. After we invest, work to support the success of the company. My focus is on media and content-related investments at the Cool Japan Fund. [Before joining the Cool Japan Fund], I used to work for an over-the-top service for Japanese animation [and investment banking].

When Cool Japan Fund invests in a company like Tastemade, is a condition for investment to step up its Japan-related content? [Background: In October, 2018, the Cool Japan Fund invested US$12.5 million in Tastemade, a US-based video platform, with a substantial operation in Japan, that specialises in food and travel experiences.]

Exactly. In this case, Tastemade was already serving up Japanese food and travel-related content for overseas markets, mainly in the US. And they were getting positive feedback from their from their audience [from its Japan focused content]. So they were happy to work with the Cool Japan Fund as an investor.

How is your investment committee structured?

We have something of an independent investment committee. This includes seven members. Two members are from our internal staff, Naoki Kitagawa our CEO [formerly of Sony Music Entertainment] and Mr. Yuji Kato our COO [formerly head of Japan for Permira, a European investment company]. We also have five professionals from outside of Cool Japan Fund from various industries [inclusive finance, law, liquor and cosmetics.]

Does the fund provide support outside of monetary investment to its portfolio companies?

Yes, we do a lot for the covered invested companies, business development or work as a kind of quasi-chief financial officer. For example, with Tastemade, we introduced many Japanese companies to the company as potential sponsors for their content. We introduced to some Japan governmental organisations with promotional budgets. We also introduced them to domestic media companies like Dentsu and Hakuhodo.

I noticed that the Cool Japan Fund has invested in Japanese content for Myanmar. It is a highly controversial place to invest. What was the rationale behind this? 

We think that Myanmar is an up and coming economic expansion country. Myanmar has a very tragic history. The country was governed by the army. That’s why they haven’t achieved [as much as they might have otherwise] in the media and entertainment industry. 

Now they have digital terrestrial television. They need more content from overseas countries, including Japan. But they are not capable of making their own production programming by themselves. So they have reached out to Japanese companies, including the Cool Japan Fund. We helped them establish joint company called Dream Vision Company in Myanmar. We are helping them to establish their own studio, together with NHK (Japan’s leading TV broadcasting network). 

How has the Cool Japan Fund performed financially to date?

We have made 38 investment decisions to date. According to our published annual report, our revenue for the fiscal year ending in March, 2019 was 0.8 billion yen and our net ordinary loss was was 8.1 billion yen (US$15.5 million). The loss is quite natural. Our portfolio companies are first making a loss as they are expanding their business. After they get enough scale for their business, then our portfolio companies will turn a profit.

What has been the most rewarding part of the job for you personally?

Of course, we are an economic fund, so we want to achieve profit. The thing I feel happiest about is seeing the business expansion of our portfolio companies. In the case of Tastemade, I can see more Japan-related food- and travel-related content. If their content is getting positive reaction from the overseas viewers, that’s great.

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Barry Lustig is managing partner of Cormorant Group, a Tokyo-based business and executive search strategy consultancy.