It is important to protect critical security technology while also avoiding a situation in which foreign investors steer clear of investing in Japanese companies.

The government has submitted a bill to revise the Foreign Exchange and Foreign Trade Law in the extraordinary Diet session, to tighten controls on foreign investment in Japanese companies. The aim is for the revised law to come into effect in April next year.

The tightened controls will apply to foreign companies and individuals purchasing shares in Japanese companies involved in 155 industries, including space, cybersecurity and telecommunications.

In the United States and Europe, restrictions on foreign investment have been tightened, with countries such as China in mind. It is the responsibility of the government to prevent investment that could jeopardize national security. It is understandable that Japan will follow the global trend.

Under the current system, foreign investors are required to submit to the government a prior notification when they acquire 10 percent or more of outstanding shares or shares with voting rights of listed companies. With the proposed latest revision, the basis of prior notification will be tightened to 1 percent or more.

Shareholders that hold 1 percent or more of shares in a listed company can submit proposals at shareholder meetings. This is said to be the reason for establishing the new criterion. If the government finds a problem with a planned investment during the screening process, it will advise a change or cancellation of the investment, among other moves. The system will become more complex. The government must try to provide thorough explanations.

For instance, in the case of a company engaged in a wide range of businesses, it is difficult to determine whether their businesses include a sector subject to the prior-notification requirement. There are more than 3,000 listed companies. It is necessary for the government to make efforts to prevent confusion by, for example, presenting a list of targets subject to the tightened controls as soon as possible.

What is concerning is the impact on the stock market. Overseas investors account for more than 60 percent of stock transactions in Japan. If investment slows down due to complicated procedures, stock prices could be hit hard.

According to the bill to revise the Foreign Exchange and Foreign Trade Law, those who buy shares for investment purposes, not to get involved in corporate management, will be exempt from submitting a prior notification in principle.

In order to receive the exemption, investors must meet such conditions as confirming they do not intend to propose a transfer or closure of an important business.

Some have pointed out that overly strict regulations will make it difficult for shareholders to make constructive requests to companies. The government needs to take a cautious approach based on Diet discussions.

In principle, investment in particularly important industries, such as nuclear power, will not be exempted from the prior notification requirement. The government will set a list of industries to be subject to the exemption in its ordinance and notify the public. Details must be released as soon as possible.

It is a basic policy of the government to encourage foreign investment in Japan and promote economic growth. It is hoped that it will exercise wisdom so that foreign investors will not shy away from the Japanese market.

The restriction of exports to prevent the outflow of technology in such fields as artificial intelligence, robotics and biotechnology, as well as know-how on commercialization, is likely to be an ongoing issue henceforth.