Japan to restrict foreign investment for domestic tech and telco companies

Among the affected industries are the telecommunications, semiconductor manufacturing, and mobile phone manufacturing sectors.
Written by Campbell Kwan, Contributor
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The Japanese government announced on Monday that it will tighten the rules for foreign investors that are looking to buy into domestic tech companies.

The new rules, set to be effective August 1, add 20 industries onto an approval list where foreign investors will be required to gain approval from the Japanese government if they are to purchase a Japanese company operating within those industries.

Foreign investors will have to report to the Japanese government about any investment that they wish to make if it comprises 10% or more of a Japanese company within the affected industries. Any of these foreign investments could be blocked if it is deemed a "national security threat".

"With the increased importance of securing cyber security in recent years, we have decided to take the necessary steps to prevent situations that would severely affect Japan's national security, including the addition of the integrated circuit manufacturing industry to the industries that require prior notification based on Japanese foreign exchange and trade law," various Japanese ministries said in a joint statement.

See: Japanese government to create and maintain defensive malware

Among the industries added to the approval list are the telecommunications, semiconductor manufacturing, and mobile phone manufacturing sectors.

Prior to these additions, the list already restricted foreign investments in industries such as aircraft, nuclear equipment, and weapons. 

The Japanese government has not stated if there were any specific countries or companies that would be affected by these new rules applied to the tech and telco-related industries. 

The announcement follows trade talks that were carried on the same day between Japanese Prime Minister Shinzo Abe and US President Donald Trump. 

The United States earlier this month enforced a trade restriction that banned US companies from buying, installing, or using foreign-made telecommunications equipment that were made by "foreign adversaries". It also added Huawei to its Entity List, which requires US companies to gain approval from government to sell equipment to Huawei. 

See: Japanese telcos pull back sale of new Huawei smartphones

Huawei Deputy Chairman Ken Hu last week compared the United States' trade restrictions to the erection of the Berlin Wall, saying it creates a "dangerous precedent" that will affect international markets, cut off global supply chains, and disrupt fair competition.

"We don't want to see another wall [like the Berlin Wall] and we don't want to go through another painful experience. Equally, we don't want to build a new wall in terms of trade, we don't want to build a new wall in terms of technology either."

Panasonic has ceased business with Huawei where it would be in breach of the United States' executive order, according to a BBC report. Meanwhile, Japanese telcos SoftBank and KDDI pulled back the sale of Huawei's new handsets around the same time due to Google's decision to restrict the Chinese vendor's access to the mobile operating system.  


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