Japan's Liberal Democratic Party secured a historic two-thirds majority in the February general election, leading to the formation of Prime Minister Sanae Takaichi's second cabinet. One of the top priorities of Takaichi's cabinet is to strengthen national security capabilities through the early enactment of a revision to the Foreign Exchange and Foreign Trade Act, which aims to tighten foreign investment screening.
The proposed revision includes the creation of a Foreign Investment Committee, similar to the Committee on Foreign Investment in the United States (CFIUS). Japan's Ministry of Finance, the Ministry of Economy, Trade and Industry, the National Security Secretariat and other bodies will be part of the proposed framework, aiming to strictly assess potential security risks in foreign investments.
The government currently designates “core industries” as particularly critical for national security. These sectors include aircraft, energy infrastructure, advanced technologies (such as semiconductors and cybersecurity), and the production of pharmaceuticals for infectious diseases. Foreign investors acquiring a stake of at least 1% in listed companies in the designated sectors are required to submit an application in advance. Authorities can order the investment plan to be altered or scrapped if security concerns are identified during the screening process.
The revision expands targets for review to include indirect holdings and Japanese investors influenced by non-resident foreigners, non-Japanese governments or state-owned companies. It also allows authorities to scrutinize non-designated industries if national security risks are significant.[1] [2]
In this environment, companies are well advised to conduct self-due diligence in advance of the approval process in order to maximize a successful transit through the review process. This is necessary to mitigate risks of regulatory violations, hidden foreign influence, supply chain vulnerabilities, and potential impacts on national security.
With the planned revision to the foreign exchange law, investors in Japan will have to submit an application if they are looking to invest in companies in the designated industries at the instruction of non-Japanese governments or state-owned companies.
https://www.japantimes.co.jp/business/2026/01/08/economy/japan-foreign-investment-committee/
