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Japan's new rules on foreign investment risk capital flight

Protecting 'strategic companies' may prove costly to Abe government

Japan's stricter foreign investment rules are expected to come into force next spring. (Nikkei montage/Reuters)

TOKYO -- Japan's new rules on foreign investment in domestic companies, which the government claims are vital to national security, will scare off foreign investors and hinder efforts to improve corporate governance even though both are central to Prime Minister Shinzo Abe's reform drive, investors and analysts have warned.

Legislators passed the Revisions to the Foreign Exchange and Foreign Trade Control Law on Nov. 22, with the new rules expected to take effect next spring.

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