Japan to Tighten Foreign Investment Rule for Defence, Nuclear Firms

The Japanese government plans to tighten rules for foreign firms investing in Japanese companies in sectors impacting national security such as defence, aerospace and nuclear energy.

Foreign exchange laws will be revised to require foreign investors to seek prior approval before obtaining a 1 percent or higher stake in such a company, lowering the threshold from the current 10 percent, the Mainichi reported quoting unnamed government sources.

A relevant bill will be placed before the Japanese parliament, the Diet during its session starting today.

The stricter rule is coming even as the government plans to simplify procedures to encourage foreign investment in sectors not related to national security.

Japan is worried that its intellectual property in the high-tech sectors impacting national security would be compromised if it provides greater access to foreign companies.  It is particularly worried about Chinese firms gaining back-door entry by means of investing in local forms and taking away technical know-how.

Japan recently restricted the export of certain types of semi-conductors to South Korea, a country seen as a close ally in the Asia-Pacific region. In addition, it keeps a close watch on Chinese companies who are often accused of obtaining sensitive technology illegally.