Japan is taking steps to improve the monitoring of the ownership of its companies in industries which it considers as critical to its national security.
According to two officials with knowledge of the matter at hand, Japanese officials are considering to lower the 10% ownership threshold at which foreigners are required to report stakes in domestic companies.
The move is aimed at improving the monitoring of Chinese investment in industries which are important to national security.
The potential move mirrors steps taken by EU and U.S. officials in recent years and reflect a growing unease in Japan about the possibility of Chinese state-backed companies gaining access to key technology.
“We need to strengthen monitoring for national security but we don’t want to hinder foreign direct investment itself,” said an official on the condition of anonymity since these talks have not been made public.
Under current rules, a foreign entity which plans on taking a stake of at least 10% in a Japanese firm, the foreign entity will have to report the matter. Potential changes could see this threshold lowered, although the new threshold is yet to be finalised, said officials.
“The United States and Germany have taken similar measures aimed at China. Japan is much further behind when it comes to protecting the security of its economy,” said the second source.
According to a document on Japan’s finance ministry’s website, the government is taking, what appears to be, an initial step by changing how the current 10% threshold is calculated.
From October, its 10% threshold would only apply to shares with voting rights, rather than all outstanding shares presently, which means an effective tightening in the reporting criteria.