Employees of Japan's microprocessor maker Renesas Electronics work at the company's Naka wafer fabrication factory in Hitachinaka, Ibaraki prefecture on June 10, 2011.
Kazuhiro Nogi | AFP | Getty Images
Japan's government said on Mondaythat high-tech industries will be added to a list of businessesfor which foreign ownership of Japanese firms is restricted.
The new rule, effective Aug. 1, comes amid heighteningpressure from the United States in dealing with cyber-securityrisks and technological transfers involving China.
The Japanese government made no mention of specificcountries or companies that will be impacted by applyingexisting foreign ownership restrictions to the IT and telecomsindustries.
The announcement came on the same day visiting U.S.President Donald Trump and Japanese Prime Minister Shinzo Abeare holding talks in Tokyo on trade and other issues.
The United States has warned countries against using Chinesetechnology, saying Huawei Technologies could be used byBeijing to spy on the West. China and Huawei have stronglyrejected the allegations.
"Based on increasing importance of ensuring cyber securityin recent years, we decided to take necessary steps, includingaddition of integrated circuit manufacturing, from thestandpoint of preventing as appropriate a situation that willseverely affect Japan's national security," Japanese ministriessaid in a statement.
Japan wants to prevent a leakage of technology deemedimportant for national security or damage to defense output andtechnological foundation, they added.
The new rule will be applied to 20 sectors in informationand communications industries, according to the joint statementby the finance ministry, trade ministry and communicationsministry.
Under the foreign exchange and foreign trade control law,Japan brings certain industries such as airplanes,nuclear-related sectors and arms manufacturing under foreigncapital controls.
The law requires foreign investors to report to the Japanesegovernment and undergo inspection in case they buy 10% or moreof stocks in listed Japanese companies or acquire shares ofunlisted firms.
If the government finds any shortcomings, it can orderforeign investors to change or cancel their investment plans.
As an industry expert deeply immersed in the field of international business regulations and technology security, I bring a wealth of knowledge to shed light on the recent developments in Japan's foreign ownership restrictions, particularly in the high-tech sector.
The Japanese government's decision to expand the list of businesses subject to foreign ownership restrictions, effective August 1, marks a significant response to the escalating global concerns surrounding cybersecurity risks and technological transfers, especially those involving China. The move comes in the wake of heightened pressure from the United States, a country that has been at the forefront of urging nations to take precautionary measures against potential threats associated with Chinese technology.
The article mentions the addition of high-tech industries to the list without specifying particular countries or companies that will be impacted. This deliberate omission reflects the sensitivity and diplomatic intricacies involved in addressing the issue. The joint statement by the finance ministry, trade ministry, and communications ministry highlights the importance of ensuring cybersecurity, stating that the decision is driven by the need to prevent situations that could severely affect Japan's national security.
The focus on integrated circuit manufacturing and its inclusion in the foreign ownership restrictions is particularly noteworthy. This move underscores Japan's commitment to safeguarding critical technology that is deemed vital for national security. The motivation is clear – to prevent the leakage of technology and potential damage to defense output and technological foundations.
The new rule is set to impact 20 sectors within the information and communications industries. The application of the foreign exchange and foreign trade control law, which already covers sectors like airplanes, nuclear-related industries, and arms manufacturing, will now extend to high-tech domains. Foreign investors will be required to report to the Japanese government and undergo inspection if they acquire 10% or more of stocks in listed Japanese companies or acquire shares of unlisted firms. The government reserves the right to order changes or cancellations to investment plans in case of identified shortcomings.
This development aligns with the global trend of countries reevaluating and reinforcing regulations to address emerging challenges in the realm of technology and national security. The backdrop of discussions between U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe on trade and related issues adds another layer of significance to these regulatory changes. The United States' warnings against the use of Chinese technology, specifically mentioning Huawei Technologies, reflect the broader geopolitical dynamics influencing Japan's decision.
In conclusion, Japan's decision to expand foreign ownership restrictions in the high-tech sector is a strategic move driven by concerns over cybersecurity and the protection of critical technology. It reflects a proactive stance in addressing evolving global challenges and aligning with international efforts to secure sensitive industries.
FAQs
However, legislation introduced in 2020 has reduced the ownership threshold for pre-approval notification to the government for foreign investors, from 10% to 1%, particularly in industries deemed to pose potential risks to Japanese national security.
What is Japan's attitude towards foreign investment? ›
The Japanese government actively welcomes and solicits foreign investment and has set ambitious goals for increasing inbound FDI. Despite Japan's wealth, high level of development, and general acceptance of foreign investment, inbound FDI stocks, as a share of GDP, are the lowest in the OECD.
Can foreigners own a business in Japan? ›
Foreign nationals wishing to start up business in Japan need to obtain a "Business Manager" status of residence. To receive this status of residence, in addition to opening an office, the applicant must employ at least two people full-time, or invest at least 5 million yen in Japan.
Can a foreign company acquire a Japanese company? ›
Partnering, investing in, and acquiring Japanese companies are options for foreign companies to break into Japan's market, to expand business in Japan and to acquire Japanese technologies – especially manufacturing technologies.
What did Japan do to limit foreign influence on the country? ›
The directives included banning the religion of Christianity and prohibiting Japanese people from making or returning from trips overseas. There were also directives that restricted foreign trade with various countries. The concept of sakoku largely stemmed from Japan's mistrust of foreigners.
Does Japan have any restrictions? ›
Japan is now open to travelers from all countries or regions.
What are the issues behind Japan's foreign policy? ›
Japan is engaged in several territorial disputes with North Korea, South Korea, Russia, China and Taiwan. Relations with Russia have been strained due to Japan's rejection of Russian control of the Southern Kuril Islands, since 1945. For current issues see Foreign relations of Japan.
Why is Japan FDI so low? ›
Government restrictions on investment have played a major factor in limiting the FDI in Japan. Others factors include Japan's long history of life-time employment and the lack of local managerial talent.
Which country does Japan invest the most? ›
Japan by Numbers: The countries where Japan invests the most
- No. 1: United States of America. The three top areas of Japanese investment in the US in the manufacturing sector are electrical machinery, rubber and leather, and general machinery. ...
- No. 2 : China. ...
- No. 3: the United Kingdom. ...
- No. 4: the Netherlands. ...
- No. 5: Thailand.
Can foreigners set up a business in Japan? Setting up a business in Japan is not only reserved for Japanese nationals. Foreign nationals can also start a business in Japan. All they need to do so is a personal bank account in Japan or a director/shareholder with such an account and an address for registration.
Challenges of Doing Business in Japan
- Higher standards than what companies are used to.
- Low levels of English outside of the big cities.
- There are some weaknesses in the tax system.
- Recruitment of highly Skilled Japanese employees.
Ease of doing business
According to the World Bank's Doing Business report for 2020, Japan ranks number 106 (out of 190 countries) for starting a business.
What American companies are owned in Japan? ›
Some well-known American-based companies in Japan: GE, Apple, Dell, IBM, Hewlett-Packard, Google, Coca-Cola, Adidas,Nike, Harley-Davidson, Citibank, Bank of America (Merrill Lynch), Aflac, American Express, JP Morgan, Morgan Stanley, Prudential, Goldman Sachs, Procter & Gamble, Johnson & Johnson, Hard Rock Café, Tony ...
Who is the largest foreign investor in Japan? ›
The major investing countries in terms of FDI stock are the U.S. (22.3%), the UK (16.7%), Singapore (10.4%), the Netherlands (7.3%), France (7%), and Hong Kong (5.7% - data Japan External Trade Organization).
Can a foreigner own a US company? ›
A non-US citizen can start a US LLC. Some reasons why include: Access to the US market: Having an LLC lets a non-citizen sell and provide services to the US market. Credibility: Owning a US-based business can provide credibility in the eyes of customers and suppliers.
Are there no restrictions on foreign property ownership in Japan? ›
There are no legal restrictions for foreigners buying property in Japan. There is no need to have citizenship or even a residence visa in order to buy Japanese property. There is no restriction on ownership rights to land.
Can foreign nationals own property in Japan? ›
The simple answer is yes, foreigners can buy property in Japan. There are no legal restrictions that prevent you from owning land or a home. So, if you've always dreamed of living close to historic temples or modern skyscrapers, this could be your chance.
What are the import restrictions in Japan? ›
Certain items may require a Japanese import license. These include hazardous materials, animals, plants, perishables, and in some cases articles of high value. Import quota items also require an import license, usually valid for four months from the date of issuance.
What is the foreign trade policy in Japan? ›
Japan has maintained its trade policy of openness in line with WTO rules, and has refrained from raising“new barriers to trade and investment or to trade in goods and services” in keeping with the commitments made at the G8, G20, and APEC Leaders' meetings.
