“Foreign investment regulations” are regulations based on laws regulations when foreign capital invests in Japan. As an investor, if you are seeking investment from overseas, you need to understand Japan’s foreign investment regulations. The following is a brief explanation of the outline of Japan’s foreign investment regulations.
What is foreign capital regulation?
Countries around the world, including Japan, sometimes place restrictions on investment from foreigners and foreign companies for reasons such as preserving their own resources and protecting their industries. This is the ” foreign investment regulation .”
If a country enters a state of so-called “isolation,” in which it does not accept any foreign investment, it may not be able to buy up its resources, assets, and property from other countries.
Therefore, on the premise that foreign transactions can be carried out freely, “foreign investment regulations” have been established in order to manage and adjust them to the extent that they do not harm the interests of Japan.
Foreign investment regulations in Japan
Foreign investment regulations in Japan are established for the purposes of national security, maintaining public order, and public safety.
(1) Foreign Exchange Law related Regulations
The Foreign Exchange Act (the “Foreign Exchange and Foreign Trade Act”) is a law that applies to foreign transactions such as the movement of funds, goods, and services between Japan and foreign countries, and to transactions denominated in foreign currencies between residents.
The purpose of the Foreign Exchange Act is to maintain balance of payments and stabilize currencies by controlling and adjusting foreign transactions to the minimum extent necessary and promoting the normal development of foreign transactions and the maintenance of the security of Japan and the international community. The goal is to contribute to the sound development of Japan’s economy .
Source: Bank of Japan published materials and public relations activities “What is the Foreign Exchange Law?”
Cases require prior notification and subsequent reporting. When a foreign investor acquires shares of a Japanese company, currently, advance notification is required when purchasing shares with a holding ratio of 1% or more. Target industries include agriculture, forestry and fisheries, mining, petroleum, leather and leather product manufacturing, air transportation, and security-related industries, as well as IT (information technology)-related industries such as semiconductor memory.
Furthermore, advance notification is also required when foreign investors take any action that will affect the management of a Japanese company in which they have already invested, such as proposing the appointment of directors or selling important businesses. If the government determines that there is a “security issue,” it can suspend the decision.
(2) Restrictions on investment by foreigners or foreign companies in domestic companies based on individual business laws
Foreign capital regulation based on individual business laws is a method of restricting foreign capital within certain industries within the scope of the law .
The applicable laws are as follows.
¦ Mining Law
Unless you are a Japanese citizen or a Japanese corporation, you are prohibited from becoming a mining rights holder.
Act on Nippon Telegraph and Telephone Corporation, etc. (NTT Act)
It is prohibited for the “percentage of voting rights held by foreigners to exceed one-third” and prohibits foreigners from becoming directors.
¦ Radio Act
Radio station licenses shall not be granted to foreigners, corporations headed by foreigners, corporations in which foreigners account for one-third or more of the board members, and corporations in which foreigners account for one-third or more of the voting rights. has been established. Furthermore, this standard is even stricter and applies to radio stations for “basic broadcasting” such as terrestrial TV, BS, 110 degree CS, AM, FM, shortwave, etc., and a one-fifth rate is applied.
¦ Broadcasting law
The voting rights ratio of foreign capital is set at less than 20% for the shares of television and radio broadcasters and the broadcasting holding companies that control them.
¦ Ship law
For Japanese ships, at least 2/3 of the officers must be Japanese nationals.
¦ Aviation Law
Aircraft owned by foreigners, corporations represented by foreigners, corporations in which foreigners account for one-third or more of the board members, or corporations in which foreigners hold one-third or more of the voting rights must be registered. I can not do. Also, they cannot receive permission for air transportation business.
¦ Freight forwarding business law
Foreigners, corporations headed by foreigners, corporations in which foreigners account for one-third or more of the board members, and corporations in which foreigners account for one-third or more of the voting rights must register as a Class 1 freight forwarding business. , it is not possible to obtain permission for the second class freight forwarding business.
What happens if there is a violation of foreign investment regulations?
The violation of foreign investment regulations could lead to the suspension of registration, license, permit, or any other business you are conducting under the law.
