Citing security, Japan to plug loophole in reporting rules for foreign investment

Rakuten

23/01/2025 08:00

By Makiko Yamazaki
       TOKYO, Jan 23 (Reuters) - Japan's finance ministry plans
to plug a loophole in reporting requirements for foreign
investors under the Foreign Exchange and Foreign Trade Act, in
an effort to prevent intelligence from leaking to foreign
governments.
    The step comes as countries look to strengthen control over
their economic supply chains after global shocks, including
trade tensions between the United States and China.
    The planned change, proposed at a finance ministry panel on
Thursday, will mandate prior notifications from all foreign
investors that might cooperate with foreign governments in
collecting intelligence. The requirement kicks in when such a
company attempts to acquire 1% or more of firms deemed key to
Japan's national security.
    Even though the panel did not name any country in its
proposal, the plan will most likely affect Chinese companies,
which are required to cooperate with national intelligence work
under that Beijing's 2017 national intelligence law.
    Currently, prior notifications for government review are not
required for general investors if the purchased stake is less
than 10%, with no plans to become involved in management.
    The regulatory change could prevent cases such as Chinese
tech giant Tencent Holdings'  0700.HK  acquisition of a 3.65%
stake in Japanese e-commerce firm Rakuten Group  4755.T  in
2021, which was exempt from prior notification requirements.
    Japan's ruling Liberal Democratic Party (LDP) called for a
revision in the exemption criteria last year to enhance scrutiny
over foreign investment in designated industries.
    The revised regulations could take effect in the first half
of this year after public consultation.
    
    

 (Reporting by Makiko Yamazaki. Editing by Gerry Doyle)
 ((Makiko.Yamazaki@thomsonreuters.com;))