Update on Japan’s FDI Regime:
518 Japanese Listed Companies
Now Designated as Core Restricted Businesses

Tech Alert | May.15.2020

After completion of the solicitation period for public comment on April 12, 2020, the amended ordinances (the “Amended Ordinances”) prepared by the Japanese government to implement the amended Foreign Exchange and Foreign Trade Act (the “FEFTA Amendment”), which subjects certain foreign direct investments into Japanese companies to a notification requirement followed by a certain waiting period, came into effect on May 8, 2020.  The Amended Ordinances will be fully implemented on June 7, 2020.  Please see our recent client alert here for a summary of the FEFTA Amendment and the Amended Ordinances.  While the modifications to the draft Amended Ordinances in response to public comments were not substantial, the Ministry of Finance and other ministries responsible for relevant business sectors released two important notices.

First, the Ministry of Finance published a list of all listed companies in Japan, designating them as falling into one of three categories, namely: (i) companies conducting business activities only in non-Restricted Businesses, (ii) companies conducting business activities in Non-Core Restricted Businesses and (iii) companies conducting business activities in Core Restricted Businesses, into which investment by foreign investors will be subject to the most robust filing requirements.  Five hundred eighteen Japanese listed companies are designated as falling into this third category, including Toyota Motors, Sony, Mitsubishi Heavy Industries, Hitachi, Tokyo Electric and SoftBank. A full list of classifications is here (an English version is also available).

Second, the Ministry of Finance and other ministries responsible for relevant business sectors released a notice to summarize which factors will be applied in the authorities’ screening process to provide more transparency.  They listed 12 factors to be considered during the screening process, including the identity and nature of the foreign investor, the impact the investment would have on national security, maintenance of public order or protection of public safety and others.  Please see the full list of factors to be considered during their screening process here (Japanese) or here (English).

Given the complexity of thresholds and exemptions under the FEFTA Amendment and the Amended Ordinances, non-Japanese investors who are considering investments in Japan should analyse whether and what type of filing they need to make at early in the process with support from Japanese-qualified legal counsel.