JAPAN Trends and Developments Contributed by: Takeshi Iitani, Reid Monroe-Sheridan, Takahito Fujii and Akira Kawashiro, southgate
• the roles of key stakeholders; • typical processes; • potential benefits; • cautionary points; and • associated risks.
of investors with close ties to foreign governments, and by introducing a new category of “designated core business entities” subject to restrictions on their ability to take advantage of the prior notification exemption process. The practical impact of these amendments was illustrated in Yageo Corporation’s takeover bid for Shibaura Electronics. As certain businesses of Shiba - ura Electronics, including its thermistor operations, were classified by the Japanese authorities as fall - ing within the newly expanded “core” sectors, Yageo was required to make multiple prior notifications under FEFTA and respond to supplemental inquiries. The transaction consequently underwent an extended national security review lasting approximately seven months before clearance was granted. In January 2026, the Ministry of Finance’s advi - sory body, the Council on Customs, Tariff, Foreign Exchange and Other Transactions, published a report outlining the direction of further amendments to FEF - TA. The report proposes additional measures, includ - ing (i) the regulation of certain indirect acquisitions (eg, acquisitions of shares in a foreign parent company holding shares in a Japanese company) and (ii) the introduction of call-in powers for certain investments in non-designated sectors. A bill to amend FEFTA reflecting the report is expected to be submitted dur - ing the current ordinary session of the Diet. FEFTA may also present an obstacle to hostile takeo - ver bids: Seven & i Holdings was classified as a “core” business on the list published by Japan’s Ministry of Finance under FEFTA amid heightened attention surrounding Alimentation Couche‑Tard’s takeover proposal. While the causal relationship between this classification and the takeover bid remains unclear, Alimentation Couche‑Tard withdrew its proposal in July 2025, citing a lack of constructive engagement by Seven & i. While still generally less expansive in scope than the United States’ CFIUS regime and simi - lar regulatory schemes, Japan’s FEFTA regulations are gradually becoming more stringent and sophisticated. Increased Shareholder Activism Activist shareholders, both domestic and internation - al, are both assertive and influential in the Japanese market. Not only do activist funds currently hold the highest share of Japanese market capitalisation in the
The second outlines five “Basic Actions” expected of Japanese corporate executives to enhance the effec - tiveness of foreign capital utilisation (with reference to illustrative case studies), namely: • strategy development; • investor matching; • negotiation; • final agreement; and • post-merger integration. To enhance transparency and accessibility for global investors, an official English version of the Guidebook was released in September 2025. Amendments to the notification rules of the Foreign Exchange and Foreign Trade Act On the other hand, amendments to the notification rules of the Foreign Exchange and Foreign Trade Act (FEFTA) have resulted in stricter filing requirements for foreign direct investments. To regulate transactions that pose a national security risk through the poten - tial outflow of domestic technology overseas, FEFTA requires foreign investors to file a prior notification before investing in Japanese companies that operate within designated business sectors. An amendment to the FEFTA notification rules that came into effect in September 2024 expanded the list of “core” busi - ness sectors, which trigger the greatest government scrutiny among “designated” sectors, to include the manufacturing of: • semiconductor manufacturing equipment; • advanced electronic components; • machine tool components; • marine engines;
• optical fibre cables; and • multifunction machines.
A subsequent amendment in May 2025 further tight - ened the regime by narrowing the scope of prior noti - fication exemptions, particularly for certain categories
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