Japan is accelerating its efforts to secure domestic companies from falling too deep into foreign control. The government released a new list of firms that will be subject to tighter foreign ownership rules. The list of companies included major players in key industries, including Japanese giants such as Toyota Motor Corp and Sony Corp.
The measure is similar to those imposed by the United States and other western nations with the aim to enhance scrutiny over the ownership of key industrial players considered to be vital to national security. Japan's newly published list includes 518 firms out of the 3,800 publicly listed firms on its local equities markets. The companies on the list have been deemed core to national security and therefore are potential targets for tougher regulatory scrutiny.
According to the country's Ministry of Finance, tighter regulations related to foreign investments will be imposed on the companies. The new rules on the companies, which are mostly involved in industries such as arms, space, nuclear, aviation, oil, telecoms, and consumer electronics, will take effect immediately.
Under the stricter regulators, foreign investors that want to buy a 1 percent stake or more of the companies on the list will have to go through pre-screening. Under the old rules, only purchases of a 10 percent stake or more had required pre-screening.
Finance Minister, Taro Aso, mentioned in a statement that he believes that revised law should accelerate foreign direct investment in Japanese companies. He added that the measure was put in place to also protect the technology and patents of Japanese firms to secure the country's national security.
Critics of the new regulations have argued that the revised laws will likely discourage foreign investors in Japan's stock markets. The stricter regulators are apparently counter to the government's push to bolster foreign investment to revive the economy.
Analysts have pointed out that Japan is likely concerned about China's growing global influences, particularly in key industries such as cybersecurity, telecoms, and defense. The country likely wants to control the outflow of key patents and technologies by enhancing its vetting process for foreign ownership.
Tensions between China and Japan recently escalated after the former announced that its $1 trillion stimulus package will include a $2.2 billion budget to entice Japanese firms to move their production out of China. Japanese officials noted that they simply wanted to reduce Japan's reliance on China given the continued disruptions in the country's supply chains caused by the global coronavirus pandemic.
