Addition of Businesses Required to Submit Prior Notification Concerning Inward Direct Investment

1. Outline of the revision

Foreign investors that intend to undertake inward direct investment, etc. in specified types of businesses in Japan are required to submit a prior notification under the provisions of Article 27 (1) of the Foreign Exchange and Foreign Trade Act (Act No. 228 of 1949; hereinafter referred to as “inward direct investment, etc.”). In addition, foreign investors that intend to undertake specified acquisition of stocks or equity from specified types of businesses are required to submit a prior notification under the provisions of Article 28 (1) of the Act (hereinafter referred to as the “specified acquisition”). Concerning these specified types of businesses, the government of Japan, bearing in mind the recent enhanced importance of consolidated cybersecurity measures and placing eyes on the need for appropriate prevention of acts that may cause conditions leading to serious damage to Japan’s security, e.g., leakage of technologies of significance in terms of domestic security and damage to domestic defense-related production or technological infrastructures, decided to take necessary measures to these ends, e.g., addition of manufacturers of integrated circuits and other types of businesses to the coverage of these provisions, and on May 27, 2019, publicized the related public notices* in the official gazette.

*Note: The related public notices are:

• The Pubic Notice of the Partial Revision of the Provisions under which the Minister of Finance and the Competent Minister for the Business Determine the Types of Businesses Pursuant to Article 3 (4) of the Order for Inward Direct Investment, etc. (Public Notice No. 1 of the Cabinet Office, the Ministry of Finance, the Ministry of Internal Affairs and Communications, the Minister of Finance, the Ministry of Education, Culture, Sports, Science and Technology, the Ministry of Health, Labour and Welfare, the Ministry of Agriculture, Forestry and Fisheries, the Ministry of Economy, Trade and Industry, the Ministry of Land, Infrastructure, Transport and Tourism, and the Ministry of the Environment of May 2019); and
• The Public Notice of the Partial Revision of the Provisions under which the Minister of Finance and the Competent Minister for the Business Determine the Types of Businesses Pursuant to Article 3 (1) and Article 4 (3) of the Order for Inward Direct Investment, etc. (Public Notice No. 2 of the Cabinet Office, the Ministry of Finance and the Ministry of Internal Affairs and Communications, the Minister of Finance, the Ministry of Education, Culture, Sports, Science and Technology, the Ministry of Health, Labour and Welfare, the Ministry of Agriculture, Forestry and Fisheries, the Ministry of Economy, Trade and Industry, the Ministry of Land, Infrastructure, Transport and Tourism, and the Ministry of the Environment of May 2019).

In deciding on which types of businesses should be added to the coverage of the provisions in the process of this revision, the government made no change in the conventional procedures taken under two policies: the Policy for Examination Periods Involving the Prior Notification of Inward Direct Investments, etc., which was publicized in March 2009, and the factors that the Ministry of Finance and the competent ministries for the business consider when examining a prior notification in relation to inward Direct Investment, etc. and the Specified Acquisitions in accordance with the Foreign Exchange and Foreign Trade Act, which was publicized in August 2017.

2. Future schedule

The revised public notices will come into force on August 1, 2019. However, as these notices provide a grace period, respectively, if foreign investors intend to undertake inward direct investment, etc. in the types of businesses newly added to the coverage of the provisions on or before August 30, 2019, they are not required to submit a prior notification. Meanwhile, if foreign investors intend to undertake inward direct investment, etc. in the types of businesses newly added to the coverage of the provisions on and after August 31, 2019, they are required to submit a prior notification on and after August 1, 2019.

Moreover, regarding the submission of a prior notification of specified acquisition, the revised public notices also provide a grace period similar to that mentioned above, respectively.

Read more: https://www.meti.go.jp/english/press/2019/0527_001.html