Image Credits : Japan-forward
Japan’s foreign investment regulations, a senior official from the Ministry of Finance has stated that Japanese companies cannot misuse national security designations to prevent foreign takeovers. The announcement comes amid growing concerns about the strategic misuse of security laws to block international acquisitions, particularly in the context of Japan’s increasing economic interdependence with global markets.
The official, who spoke on the condition of anonymity, emphasized that while Japan’s foreign investment laws do include provisions to protect national security, these should not be exploited by domestic firms to stymie legitimate foreign interest.
Japan’s foreign investment landscape is governed by the Foreign Exchange and Foreign Trade Act (FEFTA), which mandates that foreign investors seeking to acquire a significant stake in sensitive sectors such as defence, telecommunications, and nuclear power must undergo a government review. This process allows the government to block any investment deemed a threat to national security.
Ministry’s recent clarification seeks to ensure that this protective measure is not misused. The move comes in response to growing criticism that some Japanese companies might attempt to invoke national security concerns to fend off foreign investors, even when the investments pose no real threat. Such tactics, critics argue, could undermine Japan’s attractiveness as an investment destination and hinder the free flow of capital.
Japan in recent years has tightened its foreign investment regulations, particularly in light of increased geopolitical tensions and the global trend towards greater scrutiny of foreign direct investment. The amendments to FEFTA, enacted in 2020, lowered the threshold for government scrutiny from 10% to 1% of shareholdings in designated sectors, making it easier for the government to intervene in potential foreign takeovers.