KKR Can't Crack Japan's Deal Club

Japan has long been a tough market for buyout firms, particularly foreign ones, due to a historical aversion to job cuts and the perception that "vulture funds" - as they're often dubbed in Japan - focus solely on profits, not the health of the companies they buy. Earlier this year, when struggling Japanese chipmaker Renesas Electronics Corp. was looking for an investor to bolster its finances, US private-equity giant KKR & Co. stepped up to the plate, say people close to the talks.

But when Renesas announces the new investment - as early as this month - the benefactor won't be KKR but a group led by the Innovation Network Corp. of Japan, a government-backed fund that bid against KKR at the urging of Japan's powerful industry ministry and Renesas customers such as Toyota Motor Corp.

The story of how KKR was shouldered aside in the Renesas deal underscores the hurdles private-equity firms face in Japan, and how the government and big corporations still wield influence over strategic industries.

Read more in the WSJ.