Japan enacts tighter foreign investment rules over national security risks
Japan updates foreign investment law with enhanced screening and restrictions for security.
Why it matters: Legal advisors and corporate counsel must navigate stricter compliance for inbound M&A in Japan under these reforms.
- Amendments to Japan’s Foreign Exchange and Foreign Trade Act took effect June 5, 2026.
- A new cross-ministerial committee, co-chaired by the Finance Ministry and National Security Secretariat, oversees FDI screening.
- Indirect acquisitions of 50%+ in foreign entities holding Japanese shares now require prior notification.
- Authorities can impose risk mitigation conditions and intervene post-closing on certain investments posing security risks.
On June 5, 2026, Japan implemented amendments to the Foreign Exchange and Foreign Trade Act (FEFTA) to strengthen its foreign direct investment (FDI) screening system. The changes aim to balance promotion of inward investment with robust safeguards addressing national security concerns.
The revised law introduces a new cross-ministerial committee co-chaired by the Ministry of Finance and the National Security Secretariat to assess security risks related to foreign investments. This committee functions similarly to the U.S. CFIUS, providing coordinated government oversight.
A notable expansion is the inclusion of indirect acquisitions in the screening process. Foreign investors acquiring 50% or more of voting rights in a foreign entity holding shares of a Japanese company must now provide prior notification. This closes previous gaps in the regulatory framework related to complex deal structures.
The amendments also codify risk mitigation measures, enabling authorities to impose conditions on investments to protect national security. Additionally, Japanese regulators acquire the power to intervene after deal closing in certain non-notifiable cases if risks are detected.
According to the Ministry of Finance, the reforms "aim to enhance the FDI screening system and thereby further promote inward foreign direct investment that contributes to the sound development of the Japanese economy, while ensuring appropriate responses to inward FDI that may pose risks to national security."
The consultation framework provisions took effect immediately upon promulgation. Remaining substantive requirements will activate on a date set by Cabinet Order within one year.
These new rules require close attention from legal professionals advising on cross-border mergers, acquisitions, and regulatory compliance in Japan’s evolving investment landscape.
By the numbers:
- June 5, 2026 — Date FEFTA amendments were promulgated
- 50% — Ownership threshold triggering notification for indirect acquisitions
- Within one year — Cabinet-ordered timeline for substantive changes to take effect
What's next: Cabinet Order to specify effective date for the remaining substantive provisions within one year.