Impacts of Amendments to Foreign Direct Investment Regulations on Foreign Investment in Japanese Technology Companies

Author: Keiji Tonomura, Masaki Mizukoshi (Co-author)

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Publisher: Nagashima Ohno & Tsunematsu

Journal / Book: NO&T Japan Legal Update No.23 (June, 2020)

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*Please note that this newsletter is for informational purposes only and does not constitute legal advice. In addition, it is based on information as of its date of publication and does not reflect information after such date. In particular, please also note that preliminary reports in this newsletter may differ from current interpretations and practice depending on the nature of the report.

I. Introduction
On May 8, 2020, amendments to the Foreign Exchange and Foreign Trade Act (the “FEFTA”), which regulates foreign direct investments (“FDI”) in Japan1, as well as its related cabinet orders, ministerial ordinances and public notifications (collectively, “Amendments”) came into force, and will be fully implemented from June 7, 2020.

The Amendments are a continuation of recent changes that have been made to Japan’s FDI regulations. In August 2019, an amendment to the Notifications on Business Sectors came into effect and expanded the scope of the sectors that require advance filings under the FDI regulations (“designated business sectors”) to include, among others, software, data processing services, and Internet‐use support sectors. Foreign investors who invest in companies engaged in business in the technology sector and technology companies themselves are no longer unaffected by the review process under the FDI regulations.

Although the Amendments include a number of changes to the FDI regime, the expansion of both the scope of the activities that are subject to the advance filings requirement, together with the expansion of the scope of the designated business sectors in 2019, has an impact not only on capital contributions and acquisitions of companies engaged in technology‐related businesses, but also on their management and corporate activities after capital contributions and acquisitions. This article provides an overview of the Amendments with a particular focus on topics relating to businesses in the technology field.

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