Japan’s Laws and Regulations on Inward Direct Investment

Japan’s Laws and Regulations on Inward Direct Investment

Relevant Departments

Japan’s Ministry of Economy, Trade and Industry (METI) is in charge of its inward and outward investment. Other ministries involved in investment policy include Cabinet Office, Ministry of Internal Affairs and Communications, Ministry of Justice, Ministry of Foreign Affairs, Ministry of Health, Labor and Welfare, Ministry of Finance, Ministry of the Environment, Ministry of Education, Culture, Sports, Science and Technology, Ministry of Agriculture, Forestry and Fisheries, etc. To further promote inward direct investment, the government provides cross-departmental one-stop service to foreign investors by setting up a council for Promotion of Foreign Direct Investment in Japan, which is subject to Cabinet office, with Japan External Trade Organization (JETRO) as the service outlet.  


Regulations on Industries for Investment

Prohibited Industries 

Japan implements a relatively open investment policy that “principally free with exceptional restriction” and currently no industry is prohibited by law or regulation. In general, foreign capital has free access to most of the industries. 


Restricted Industries

There are ordinances in Japan to restrict the businesses that may impair national security and those haven’t acquired full liberalization. Pursuant to the provisions in Japan’s Foreign Exchange and Foreign Trade Act, prior notification is required when acquisition of equity in non-listed companies or acquisition of shares in listed companies from foreign investors either exceeds 10 percent in businesses such as agriculture, forestry and fisheries, mining, petroleum, leather and leather goods manufacturing, air transport, etc. As per OECD’s Code of Liberalization of Capital Movements, foreign capital is controlled in the businesses related to weapons, aircrafts, nucleus, space exploitation, power, gas, heating, communications, radio and television, railways, etc. In September 2007, carbon fiber and titanium alloy which will probably be used for military field and together with optics lens manufacturing are included as restricted businesses. In addition, there are concrete restrictions to foreign investment access in mining, communications, broadcasts, shipping and air transport industries according to the industry regulations.  

Encouraged Industries

Japan’s central government has no legislation comprehensively regulating industries as such. However, Japan’s regional governments, to enhance industrial cluster effect in accordance with their industrial layout and development plan, are making increasing efforts to attract inward investment through providing one-stop services, introducing experts, offering equal subsidies to Japan’s enterprises and favorable taxation. Acquirers have been made investment in different areas. e.g., Osaka principally attracts industries like biotechnology, precision technology, semiconductor, electronic parts, electronic equipment, etc. Kanagawa mainly promotes investment in automobiles, IT, semiconductor, biotechnology and environmental protection industry. As for Hyogo, it major encourages businesses in fine processing, assembling, semiconductor, regenerative medicine, etc.