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Politics

Japan won’t allow English for foreign investment screening

New 1% threshold expected to cause headaches for overseas investors

Nuclear reactors and storage tanks at the Fukushima Daiichi power plant: Nuclear power is one sector subject to the new 1% rule.   © Reuters

TOKYO -- Japan will not allow foreign investors purchasing a 1% or more stake in strategic Japanese companies to submit required prescreening documents online or in English at least for the time being, Nikkei has learned.

Under legislation passed in November, Tokyo is lowering the threshold for prescreening of foreign investments in fields related to national security from the current 10%. The government aims to implement the new standard, which covers industries like aerospace, nuclear power and oil, in May.

Foreign investors are concerned about the additional administrative burden the change will require and were pushing for allowing the submission of documents in English and online. But the government was unable to set up a framework at relevant agencies in time, and does not see enough of a benefit to justify the required costs.

"Having to ask a Japanese law firm to create the prescreening documents and submit them through the mail will add significantly to our costs," said an executive at a U.S.-based brokerage.

The government expects deals requiring prescreening will increase by a factor of eight once the thresholds goes down to 1%. But roughly 9 in 10 will likely be exempt from the requirement due to low security risk. Still, investors are expected to continue demanding government efforts to simplify the process. 

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