Site: Agency of Industrial Science and Technology (AIST)
Ministry of International Trade and Industry (MITI)
1-3-1 Kasumigaseki, Chiyoda-ku
Tokyo 100-8921, Japan

Date Visited: 11 October 1998

WTEC Attendees: I. Feller, G. Gamota, P. Herer, R. Harris, P. O'Neill-Brown


The Japan Key Technology Center was described by MITI officials as a government "investment" program, not as a subsidization of industrial R&D. Returns on investment (in the form of dividends paid by the new firm from income received from its intellectual property rights) are expected from JKTC support. When JKTC was established (in 1985), it was the only government-funded R&D center program. Japan's new basic law on science and technology provides additional policy tools: additional center-like programs may be initiated by other agencies. Agencies also are seen as more likely to be receptive to allowing open competitions for research proposals. This new openness also may attract new R&D players. Also, the New Energy and Industrial Technology Development Organization (NEDO) has become an important sponsor of joint R&D ventures.

JKTC's funding is based on dividends flowing from the government's one-third holdings of NTT shares. These holdings follow from the law that privatized NTT. NTT's annual dividends are estimated at 78 billion. The government directs 26 billion (about one third of these dividends) to a special account to fund JKTC (which accounts for the relatively stable level of JKTC funding over time). The possibility exists that NTT's structure may again be changed, which in turn would affect its dividend policy. Such changes, in turn, might affect the base of JKTC funding.

Given this "formula" funding arrangement, MITI has only modest control over JKTC's annual budget. Its primary role in the allocation of JKTC funds (a role shared with the Ministry of Posts and Telecommunications-MPT) is in the broad allocation of funds among program areas, in the apportionment of JKTC funds between loans and investments and between type A and B loans.

During its 13 years of operation, (1985-1998), JKTC has "invested" 240 billion. Modest income from this investment has been recorded to date, although it was noted that "R&D always takes time."

Patent data were reported as follows: In 1991, JKTC centers applied for 4,000 patents; 900 were granted. In 1996, 435 patents were granted. This latter total was said to be almost the same as the sum of patents originating in the approximately 15 other research institutes under AIST's control. "Strong encouragement" for JKTC firms to generate patentable findings is reported from both MITI and the Ministry of Finance.

JKTC submits an annual report on its operations to MITI. MITI also approves JKTC's budget, as well as advising it on specific strategic directions (e.g., to increase the number of patents).

Little variation during its 13 years of operations was reported in JKTC's formal policies. The changes that have occurred have flowed mainly from the practices of firms and the third year reviews.

Originally, little purposeful effort was made to have JKTC investments promote regional economic development. JKTC projects, however, are now regionally dispersed, and thus may serve to stimulate regional economic growth.

Published: September 1999; WTEC Hyper-Librarian