In a move that will restrict foreign investments, the Japanese government has made prior government approval mandatory for foreign direct investments in more than half of all Tokyo-listed companies, including Sony and Toyota.
According to a notification issued by Japan’s Finance Ministry after the market hours on Friday, as many as 518 companies have been named as core to Japan’s national security and require clearance for foreign investment. The list includes apartment rental agencies, online brokerage firms, travel agencies and an online gift-giving service.
The ministry said that the measures were taken in view of the nation’s national security and will not get in the way of attempts to improve corporate governance or raise shareholder returns.
As per the revised norms, foreign investors will have to notify Japan’s finance ministry before acquiring 1 per cent stake in the above listed company. The new rule will also be applicable to nominate a director or propose the disposal of a security-related division.
The rule also empowers Japan’s finance ministry to make or break foreign shareholder activism in the country, depending on whether it waves deals through, or blocks campaigns such as investor Daniel Loeb’s effort to break up Sony.
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Recently, many countries across the globe including the US, France, Germany, the UK and India, tightened controls on foreign investment in wake of the current COVID-19 pandemic.
Last month, the Indian government amended its foreign direct investment (FDI) policy to monitor and check investments into Indian companies from neighbouring countries after it was revealed that China’s central bank has hiked equity stake in HDFC above 1 per cent. Previously, only investments from Pakistan and Bangladesh faced such restrictions.
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India shares land borders with Pakistan, Afghanistan, China, Nepal, Bhutan, Bangladesh and Myanmar. Investors from countries not covered by the new policy only have to inform the RBI after a transaction rather than asking for prior permission from the relevant government department.
By Chitranjan Kumar