JAPAN Law and Practice Contributed by: Yutaro Fujimoto, Yurika Masakane, Hirokazu Tanaka and Yutaro Kato, Nagashima Ohno & Tsunematsu
Retail The Electricity Retail Business has been gradually lib- eralised since 1995 and was fully liberalised in 2016. The number of Electricity Retail Business licences has grown significantly from 57 in August 2015 to 810 in April 2026. Although most Electricity Retail Business- es are investor-owned companies, some retail elec- tricity suppliers are owned by municipal governments. While the major utilities or their wholly owned subsidi- aries in aggregate supply most of Japan’s electricity, new entrants are expanding their market share in the retail sector. As of January 2025, the share by sales volume of the electricity supplied by the new entrants was approximately 22.4%. 1.3 Foreign Investment Review Process The Electricity Business Act does not provide any nationality requirement to obtain an electricity busi- ness licence, or any restriction with respect to foreign- ers owning shares in an electricity business licence holder. Requirements However, under the Foreign Exchange and Foreign Trade Act (Act No 228 of 1949, as amended), a for- eign investor may not (i) invest in an unlisted power company; or (ii) own 1% or more of the shares in a listed power company, unless the foreign investor gives prior written notice through the Bank of Japan (BOJ) to the Ministry of Finance (MOF) and the Min- istry of Economy, Trade and Industry (METI) of the foreign investor’s intent to do so, or complies with the exemption scheme. Written notice If the foreign investor gives such notice, it may invest only after the required waiting period elapses, assum- ing the notification is not questioned or objected to by MOF and METI. The required waiting period is usually 30 days but this may be shortened or extended to up to five months at the discretion of MOF and METI. Exemption scheme The exemption scheme is applicable to (i) invest- ments which result in the investor owning less than 10% of the shares in a listed company that operates in the core sectors; and (ii) investments which result in
the investor owning any shares in a listed or unlisted company that operates in the non-core sectors. With regard to power companies, “core sectors” means a General Electricity Transmission and Distribution Business, Electricity Transmission Business, Electric- ity Generation Business which owns a power plant or battery energy storage system with a maximum capacity of 50,000 kW or more, and Specified Elec- tricity Wholesale Businesses in which the total output of electricity aggregated from power sources is 50,000 kW or more; “non-core sectors” are simply those that are not core sectors. Other requirements for prior written notice Further, under the Foreign Exchange and Foreign Trade Act, a foreign investor is also required to give prior written notice through the BOJ to MOF and METI if it proposes and consents to transfer the company’s business or dissolve the company’s business, or if it consents to appoint itself or a closely related person as a director or other material officer required to be appointed at a shareholders’ meeting. Warnings and Orders If, during the waiting period, MOF or METI decides that the investment may undermine national security, public order or public safety, or adversely affect the national economy, MOF and METI may issue a warning to change the terms of, or cancel, the investment. If the foreign investor does not adequately respond to the warning or the foreign investor expresses an intention to disobey the warning, MOF and METI may issue an order to change the terms of, or cancel, the investment. At the time of publication of this guide, there had been only two instances of warnings to cancel an investment or an order to cancel an investment. The first were the warnings issued by MOF and METI against the Chil- dren’s Investment Fund in 2008 when it attempted to increase its shareholding in J-Power from 9.9% to 20%. The second was a warning issued by MOF and METI in April 2026 to a fund managed by MBK Partners which was attempting to acquire Makino, a machine tool manufacturer, as a wholly owned subsidiary. 1.4 Sale of Power Industry Assets The Electricity Business Act regulates the sale of an entire business, an amalgamation or merger and a
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