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BOJ Filing and FDI Category Expansion

On 7 June 2020 a significant amendment concerning filing obligations of foreign investors in Japan under the Japanese Foreign Exchange and Foreign Trade Act (FEFTA) came into effect which widely expanded the scope of mandatory prior-notification obligations to the competent governmental authorities (i.e. the Ministry of Finance (MOF) and the Ministry or Agency supervising the area of the business concerned) through the Bank of Japan (BOJ) (cf. our June 2020 Newsletter on this topic). Although this amendment to the FEFTA primarily focuses on foreign direct investments (FDI) in Japanese listed companies, the aforementioned changes also affect foreign investments in non-listed Japanese companies, mainly with regard to the following.

(1) BOJ Filing Obligations with respect to Non-listed Japanese Companies
Under the recent amendments to the FEFTA, the scope of business sectors subject to a prior- notification obligation was expanded, and the designated business sectors have been classified into two categories, namely the “core” business sector and other designated business sectors. Any FDI (the scope of which being explained in more detail under item (2) below) in a company engaging in a business falling under the “core” business sector will generally be subject to stricter scrutiny by the competent authorities as it may be deemed potentially harmful for national security, public order and safety reasons. In the wake of the COVID-19 pandemic, certain healthcare businesses (including specially controlled medical devices, etc.) were newly added to the designated “core” business sector under the FEFTA (cf. amendments to the relevant public notices: https://www.meti.go.jp/english/press/2020/0615_001.html). For the purpose of clarification, the MOF has also published the factors to be considered in the screening of the prior BOJ filings under the new law (https://www.mof.go.jp/english/international_policy/fdi/gaitamehou_20200508.htm).

While a constantly updated compilation of the publicly listed companies falling under the designated business sectors of the amended FEFTA is published by the MOF, allowing foreign investors to confirm whether or not a prior BOJ filing would be required, NO such list is published for non-listed private companies. Furthermore, unlike for listed companies, NO shareholding quota threshold applies to non-listed companies subject to an FDI. Thus, the acquisition of even one (1) share of such non-listed company could trigger a prior BOJ filing obligation, if the target company is engaged in an activity of the designated business sectors.

In addition, the newly introduced exemptions for foreign financial institutions under the amended FEFTA available to an FDI in a listed Japanese company do NOT apply to the acquisition of shares in non-listed Japanese companies active in the “core” business sector. More specifically, if the non- listed target company is engaged in activities falling under the designated “core” business sector, no exemption applies to the acquisition of shares of such non-listed company. Thus, an exemption to the prior BOJ filing obligation may only be available if the target company is engaged in the designated business sectors, other than the “core” business sector, provided that the foreign investor does not engage in any of the following: (a) the foreign investor and/or its related person(s) takes office as director or statutory auditor of the target company; (b) the foreign investor proposes, or causes other shareholders to propose, the transfer or discontinuation of the target company’s business in the designated business sector at a shareholders meeting; and (c) the foreign investor accesses confidential technology-related information concerning the business in the designated business sector.


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