ACGA Open letter on Japan Foreign Investment Law (FEFTA)

The Foreign Exchange and Foreign Trade Act (FEFTA) in Japan was revised in November 2019 to ensure that investments in Japanese companies by non-Japanese investors would not pose a risk to Japan’s national security. While ACGA understands the rationale driving the revised law, we raised various concerns regarding the lack of clarity surrounding FEFTA’s implementation. We were pleased that the Ministry of Finance (MOF) subsequently took several measures to improve transparency of the Act, yet key issues surrounding the industry classifications and exemption conditions remained unclear when the new Act became effective in May 2020.

In the past few months, we have seen various players within Japan’s investment chain (companies, regulators, and shareholders) take different and often contradictory interpretations of FEFTA. ACGA recognises that there is a difficult balancing act between protecting national security and not impeding the free flow of international capital. To minimise unintended consequences, we believe that an open and transparent discussion on FEFTA among relevant players in Japan’s investment chain is a critical part of the solution.

In this Open Letter we suggest that the Japanese government consider holding open discussions between regulators, companies and shareholders to clarify any misconceptions of FEFTA and to promote the continuation of long-term investing in Japanese companies that would ultimately support their sustainable growth and that of the greater Japanese economy.