Japan to strengthen screening of foreign investments with US-style panel
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Japan's Prime Minister Sanae Takaichi delivers her policy speech in Parliament in Tokyo, Japan, on Feb 20.
PHOTO: REUTERS
TOKYO – The Japanese government decided on March 17 to strengthen screening of foreign investments in the country by setting up a cross-ministerial, US-style panel to prevent leakage of critical technologies and intelligence.
Through a revision of the foreign exchange and trade law, the government of Prime Minister Sanae Takaichi seeks to ensure that it can identify foreign investments considered risky in terms of national economic security.
Ms Takaichi had called for the establishment of a Japanese version of the Committee on Foreign Investment in the United States (CFIUS) when she ran in the presidential election of the ruling Liberal Democratic Party (LDP) in autumn.
Establishment of the panel was also included in the ruling coalition agreement signed by the LDP with the Japan Innovation Party in October.
In her policy speech to Parliament in February, Ms Takaichi stressed the new entity would improve the effectiveness of screening of inbound direct investments.
The screening by the envisioned panel will involve the Ministry of Finance, the Ministry of Economy, Trade and Industry and the National Security Secretariat at the Cabinet Office.
The foreign exchange and trade law stipulates that the government must pre-screen foreign investors when they acquire a certain level of shares in companies engaged in critical businesses related to national security, such as aviation and electricity.
Under the draft amendment, the screening will also be conducted when another foreign company acquires a foreign company that already holds shares in a Japanese company.
If the security risk is deemed particularly high, such as when an investment is made by a company that has previously violated the foreign exchange and trade law, the government will be able to review the company’s activities even in industries not currently covered by the law.
Japanese investors recognised as being under the influence of a foreign government would also be considered “foreign investors”, according to the draft.
In the United States, CFIUS is authorised to decide whether investments in the country by foreign companies pose security risks.
If the committee identifies problems with such investments, it can advise the president to block them. KYODO NEWS
