Japan to restrict ownership of foreign investment in 12 key sectors

Japan is finalising a plan that will tighten scrutiny of foreign investment in 12 key sectors, four government sources with knowledge of the matter told Reuters. 

Confirming a report by Nikkei newspaper, two of the sourced said that the industries would include sectors like nuclear power, aerospace, defence, gas, cybersecurity, defence and telecommunications. 

Foreign investors purchasing a stake of 1% or more in certain Japanese companies will be subject to pre-screening, as against 10% now under the plan. 

Around 400 to 500 listed Japanese companies will fall under this criterion. One of the sources stated that the government plans to publish the list of the firms in April. 

Tokyo passed through parliament a change in law that would tighten reporting requirements for foreign investment in sectors related to national security, a move that reflects concern China could gain access to key confidential technology. 

Finance Minister Taro Aso said on Friday the law revision – which is expected to take effect in May before mid-year shareholders’ meetings, was aimed at boosting direct investment in Japan and responding to concerns about national security. 

“As a result, it should encourage Japan-bound investment rather than discouraging it,” Aso told reporters after a cabinet meeting. 

The move followed similar steps taken by the United States and Europe in recent years to allow greater scrutiny of ownership in industries deemed as critical to national security. 

Under a draft of the changes under consideration, the government will target 12 sectors for which foreign investors must get pre-approval for holding a stake of 1% or more in a company, as against 10% now, the finance ministry said. 

To keep away from discouraging foreign investors from investing in Japanese stocks, the government will grant exemptions on pre-reporting requirements for overseas investors who meet a set of criteria, the ministry said. 

Reported by Takahiko Wada 

Sourced Reuters 

For more foreign direct investment news follow The European. 

^{* Foreigners buying 1% or more in Japan firms face pre-screening} 

^{* About 400-500 firms fall under new criteria -sources} 

^{* Law revision aimed at boosting direct investment in Japan -Aso} 

^{* Revised law also in response to national security concerns (Updates with confirmation, finmin comment)}