Japan’s ¥10 trillion excellence fund off to shaky start

Japan’s mega-fund for universities has finished its first fiscal year in the red, causing concern over whether the high-stakes initiative can deliver a return on investment.

The fund, which is worth a total of ¥10 trillion (£55 billion), posted a deficit of ¥60.4 million, The Nikkei reported. It’s a lacklustre start for the initiative, approved by Japan’s government in 2022 with the hope of jumpstarting innovation and boosting the nation’s performance in global university rankings.

Designed to create “International Research Universities of Excellence”, the fund is expected to generate roughly ¥300 billion in annual profits from 2024. Each year, ¥20 billion will go into student support, with the remaining ¥280 billion invested in a handful of universities, which will be selected on a competitive basis and should be announced in autumn. 

But the fund’s early performance has raised concern among some scholars, who note that the strings-attached model could make it unsustainable for participating institutions.

Aki Tonami, an associate professor of international relations and economics at the University of Tsukuba, said she worried about the fund’s future, adding that many experts had previously warned the government about poor performance.

She noted that, if an investment bank managing the fund charged a 1 per cent commission, it meant that ¥100 billion of Japanese taxpayers’ money had “already evaporated”.

Even without this setback, the stakes are high for participating institutions to succeed. Critically, they must register at least 3 per cent growth in the value of their research activities over five years, something Dr Tonami said “isn’t an easy task even for many Japanese companies, let alone state-funded universities”. 

“In Japan, we call this type of funding with many strings attached doku manju – poisoned red bean cake,” she said.

Dr Tonami said she thought that universities’ decisions on whether to participate would depend on “how desperate they are to survive”.

Masami Iwata, a sociologist and professor emeritus at Japan Women’s University, noted there would be a learning curve for most institutions, with “extremely little experience” of fundraising in Japan’s higher education sector.

“It seems particularly difficult for the former national universities, which are now in a hurry to invite experts to work on financial technology,” she said.

Philip Altbach, a professor of higher education at Boston College, said the approach of relying on stocks to back the scheme was atypical, and perhaps precarious.

“We did a study recently of eight of the big ‘excellence’ projects done around the world in recent years and none relied on the unpredictable returns on investments – all were funded directly by governments,” he said.

Yet, despite the risks involved and the fund’s recent performance, academics speaking with Times Higher Education doubted that competing universities would reconsider applying.

Akira Mori, a scholar at the Research Center for Advanced Science and Technology at the University of Tokyo, said that, after all, the fund was still an “unprecedented opportunity” in Japan.

But he hinted that the initiative thus left far more to be desired. “We just hope the government will steer our path in a more desirable direction, in terms of the bond management itself and funding allocations across the country,” he said.

pola.lem@timeshighereducation.com