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Japan law to tighten foreign investment regulations takes effect

  • May 8, 2020
  • , Kyodo News , 10:11 p.m.
  • English Press

TOKYO – An amended law to tighten regulations on foreign investments in Japanese companies came into force on Friday, following similar steps taken by the United States and European countries to protect national security.


The revised foreign exchange and foreign trade law will require overseas investors to notify the government in advance if they plan to acquire a 1 percent or higher stake in listed Japanese firms in such sectors as nuclear power, arms production and cybersecurity.


Before the revision, the threshold was set at 10 percent. With the enactment of the law, the Finance Ministry released the names of 518 companies in 12 sectors deemed important for Japan’s national security.


They include Toyota Motor Corp., Sony Corp., Mitsubishi Heavy Industries Ltd., Hitachi Ltd., Tokyo Electric Power Company Holdings Inc., Central Japan Railway Co. and SoftBank Group Corp.


The law will be fully implemented on June 7. The revision is aimed at preventing sensitive information and critical technologies for Japan from leaking to other countries active in foreign investment such as China.


But the law exempts overseas investors from prior notification if they plan to buy stocks simply for asset management purposes so as not to deter direct investments in Japan.


Following calls from investors to clarify which companies will fall under the scope of the new system, the ministry divided all 3,800 listed firms in Japan into three categories — those requiring prior notification, those not requiring prior notification and those with exemptions in some cases.


However, prior notification is always necessary if foreign state-owned companies want to invest in Japanese companies.


The ministry had initially planned to disclose the list of the companies in April, but the schedule was pushed back due to the coronavirus pandemic.


Following the pandemic, Japan has decided to designate the advanced medical industry in mid-July as the 13th highly sensitive sector, as part of efforts to ensure a stable supply of necessary drugs and equipment for COVID-19 patients, according to government sources.

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