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Japan will restrict foreign ownership in 12 sectors

Author: Takahiko Wada

TOKYO (Reuters) – Japan is finalizing a plan that will tighten controls on foreign investment in 12 key sectors, four government sources with knowledge of the matter told Reuters.

These industries would include sectors such as defense, nuclear power, aviation, utilities, gas, cybersecurity and telecommunications, two sources said, confirming the Nikkei newspaper report.

Under the plan, foreign investors buying 1% or more of shares in certain Japanese companies will be pre-selected, up from 10% currently.

This criterion will cover approximately 400-500 listed Japanese companies. According to one of the sources, the government plans to publish the list of companies in April.

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

Finance Minister Taro Aso said on Friday that the law change, which is scheduled to take effect in May ahead of mid-year shareholder meetings, is aimed at boosting direct investment in Japan and responding to national security concerns.

“As a result, this should encourage, not discourage, investment in Japan,” Aso told reporters after the cabinet meeting.

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

According to the draft of the changes under consideration, the government will focus on 12 sectors for which foreign investors must obtain preliminary consent to hold 1% or more of shares in the company, compared to 10% currently, the Ministry of Finance said.

To avoid discouraging foreign investors from investing in Japanese shares, the government will grant exemptions from pre-reporting requirements to foreign investors who meet a set of criteria, the ministry said.

(Additional reporting and writing by Leika Kihara and Tetsushi Kajimoto; Editing by Chizu Nomiyama and Kim Coghill)