JAPAN Law and Practice Contributed by: Yusuke Murakami, Nobuhiko Suzuki, Yuma Ito and Masataka Hayano, Mori Hamada & Matsumoto
• Retail is regulated as a registered business, allow- ing operations to commence once the required information is submitted and the business is offi- cially registered. The gas industry is similarly regulated, as follows. • Gas production is subject to filing. • Gas pipeline operations require a license. • Gas retail requires business registration. In addition, specific permits and licenses are required for energy power generation. In particular, to partici- pate in the FIT and FIP programmes, a business plan must be certified by the Minister of Economy, Trade and Industry. Certification is granted once the nec- essary information is submitted, provided the power generation project meets certain criteria. However, for certain projects, such as large-scale solar power gen- eration, a bidding process is required, and the project must pass this process. 5.2 Primary Securities Market Regulators The Financial Services Agency (FSA) administers securities regulations under the Japanese securities regulations (the Financial Instruments and Exchange Act), including regulations involving tender offers, public offerings and proxy solicitations. The Ministry of Finance (MOF), the Ministry of Econ- omy, Trade and Industry (METI), and other relevant ministries regulate cross-border transactions under the Foreign Exchange and Foreign Trade Act (FEFTA), including inward/outward investments. Tokyo Stock Exchange, Inc (TSE) and other stock exchanges oversee transactions involving a listed company. 5.3 Restrictions on Foreign Investments In Japan, there are generally no restrictions on for- eign companies investing in Japanese companies or establishing Japanese subsidiaries within the country, with the exception of certain specific limitations on foreign investment under laws such as the Civil Aero- nautics Act, Radio Act, or Broadcasting Act. However, the Foreign Exchange and Foreign Trade Act (FEFTA) does impose certain regulations.
The FEFTA requires prior notification for “inward direct investments” by foreign investors in certain circum- stances. The definition of “inward direct investments” includes activities such as acquiring shares, setting up a new company, or lending money under specific conditions. This requirement applies if a Japanese company or its subsidiary is involved, or plans to be involved, in a business that falls within a “designated industry”. Investors must submit an advance noti- fication to the Minister of Finance and the minister responsible for the relevant industry through the Bank of Japan. This notification must be made within six months prior to the planned investment date. Once the notification is submitted, the proposed investment or related activities cannot proceed until 30 days have passed from the date of notification. This 30-day waiting period can be shortened if the investment is assessed and found not to pose any significant issues. It is important to note that industries such as electric- ity and gas are categorised as designated industries. Therefore, when considering investments in energy sectors in Japan, it is necessary to check whether the investment falls under the definition of inward direct investment and if the target company operates within a designated industry. 5.4 National Security Review/Export Control In addition to the foreign investment restrictions men- tioned in 7.3 Restrictions on Foreign Investments , the FEFTA also regulates export control. The FEFTA requires prior approval by the METI for the export of certain cargos and technologies with a potential for military application listed in the relevant government ordinances. The exporter should be careful about whether the subject product triggers a prior approval because the list also includes items that do not appar- ently seem to be related to weapons or defence indus- try depending on its specification. Also, the FEFTA has a catch-all regulation that allows cargos and tech- nologies not specifically listed under the FEFTA to be subject to approval by the METI if it is highly likely that they are used to develop or manufacture weapons.
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