Markets

Japan to Tighten Screening of Foreign Investors; Foreign Firms, Individuals to Report to Government Before Investing in Industries Deemed High Security

AP
A person looks at an electronic stock board showing the Nikkei index at a securities firm in Tokyo on Tuesday.

The Yomiuri Shimbun

2:00 JST, February 3, 2025

The government will expand the scope of overseas investors subject to screening prior to investing in Japanese companies, The Yomiuri Shimbun has learned.

A new category of “specified foreign investors” will be established for foreign companies and individuals who could pass information they obtained from investments to foreign governments.

It will become mandatory for them to report to the Japanese government prior to investing in listed companies in high importance industries from the perspective of national security. The government is believed to be aiming to prevent the outflow of technologies and other information held by Japanese companies.

The government intends to revise government and ministerial ordinances under the Foreign Exchange and Foreign Trade Law as early as spring.

The revision will label companies and individuals as specified foreign investors if they are under obligation to cooperate with foreign governments in providing information under espionage contracts or laws and regulations.

The investors will be required to report to the Japanese government prior to investing in nuclear power, telecommunications and other industries designated by the government. Such investments will be treated the same as direct investments from foreign governments.

The government is apparently concerned about China, as Chinese companies are expected to be subject to the revision. Chinese citizens and companies are obligated to cooperate with the country’s intelligence-gathering activities under China’s National Intelligence Law.Under the current system, investors are required to report to the Japanese government before acquiring at least 1% of a listed company’s shares in a designated industry. However, the requirement is waived when certain conditions are satisfied, such as the possible investor not becoming a board member of the firm they want to invest in.