Japan tightening foreign investment rules from June 7

TOKYO - Japan is significantly tightening foreign investment regulations, with implementation of the changes to begin on June 7. The changes include a new 1% prior notification threshold (lowered from 10%) for the acquisition of shares in a listed company engaged in a Designated Business Sector.

In a Client Alert, lawyers Baker McKenzie say the amendments are expected to have a substantial impact on foreign direct investment in Japan, and warn that foreign investors will need to closely review the structure of their investment and the targetted business to minimise the risk of delays and to comply with the new rules.

BM says the new Japanese regime comes at a time when other jurisdictions have  announced stronger screening of foreign investment in response to COVID-19.

The new rules provide an exemption system for prior notification for share acquisition in certain core business sectors considered critical for national security.

These include cybersecurity, electricity, gas, telecommunications, water supply, railway and oil.

In total, the designated business sectors covers 21 business sectors (containing 155 sub-sectors), including weapons, aircraft, nuclear facilities, broadcasting and agriculture. 

BM says there are plans to include medicine and medical equipment among these sectors.

 Exemption conditions on Core Sector business activities require that investors do not attend the investee companies' executive board or committees that make important decisions in these activities - and that investors do not make written proposals to the executive board of the investee companies or board members requiring their responses and/or actions by certain deadlines.

www.bakermckenzie.com (ATI).