Photo/Illutration A bullet train station is planned in this area of Dallas, Texas. (Yuko Lanham)

The Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development (JOIN), a public-private fund that is almost fully financed by the government, posted a massive loss of 79.9 billion yen ($494.3 million) in fiscal 2023.

Could it be that, in the name of “national policy,” this fund was allowed to be managed with poor investment decisions, substandard risk management and a shoddy checking system? A thorough examination is needed to clarify where the responsibility lies. 

Established in 2014, JOIN has been financing investments and loans for “infrastructure exports” promoted by the administration of former Prime Minister Shinzo Abe. The government has a 98-percent stake in JOIN, or 270 billion yen.

Among the losses incurred in the last fiscal year, a majority, or 41.7 billion yen, was from a delayed high-speed train construction project in the U.S. state of Texas.

This project is based on the Shinkansen technology of Central Japan Railway Co. (JR Tokai). Tokyo talked Washington into it, but the local lead contractor has since gone into default. However, as the project is still on, JOIN intends to recover its investment in the days ahead.

As for other losses, JOIN incurred a total of 17.9 billion yen from three urban development projects in Myanmar.

For a total of 256.1 billion yen in investments and loans to date, JOIN has 95.5 billion yen in accumulated losses. If the deficit is not recovered, this becomes a massive burden for taxpayers to bear.

JOIN’s management, as well as the Ministry of Land, Infrastructure, Transport and Tourism, which is in charge, bear a grave responsibility.

Overseas infrastructure projects are affected by local circumstances and their payback periods are long. Could the government have been guilty of overestimating the importance of the “government policy” behind those projects and underplaying the need to carefully assess their risks and profitability?

In JOIN’s case, many of its private-sector investors had already dealt with their losses more than a year ago. Has the government been putting off doing its share and disclosing the problems to the public?

JOIN’s investment decisions are subject to approval by the land ministry, which also decides the standards for assisting each project. Land minister Tetsuo Saito maintained that the ministry has made “appropriate decisions,” but the numbers indicate otherwise.

The ministry is reportedly planning to establish an experts’ panel to examine the sequence of events and study measures for operational improvement. To identify the problems, the panel must view the situation from a wider perspective, including giving a good, hard look at the ministry’s attitude.

And for that, it is vital to ensure neutrality in the ministry’s process of appointing the panel members and in the way the ministry runs the panel so that the entire exercise will not end up just serving the ministry’s interest.

Should it prove difficult to overhaul JOIN’s management system, considerations will have to be made for taking some decisive measures, such as significantly reducing its scales of operation, merging it with other organizations, or scrapping it.

The role of public-private funds is said to provide supplementary investments and loans in projects that serve the public interest where the risks cannot be borne by the private sector alone.

But on the other hand, since the funding is provided by the government’s fiscal investment and loan program, projects sponsored by public-private funds are also expected to be financially viable.

The ruling Liberal Democratic Party and its junior coalition partner, Komeito, have frequently tapped into public-private funds as a part of their economic growth strategy.

However, of the nation’s 15 major funds, nine, including Cool Japan Fund Inc., were saddled with cumulative deficits as of March 31 last year. Fundamental discussions are necessary to determine their reasons for existence and how they should be operated.

--The Asahi Shimbun, July 3

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