Japan is considering to incorporate a Japan-style “CFIUS-like” framework into the foreign direct investment (FDI) regulations. On 17 March 2026, the new bill for FDI regulations under the Foreign Exchange and Foreign Trade Act (FEFTA) was submitted to the House of Representatives. This new bill is based on the report “On the Appropriate Framework for the Inward Direct Investment Screening System, etc.” announced by the Council on Customs, Tariffs, Foreign Exchange and Other Transactions on 7 January 2026, which identified the need to amend the current foreign direct investment regulations.
The main revisions included in the new bill are as follows:
- Indirect acquisition of shares or equity in a Japanese entity
Under the current regulations, an indirect acquisition of shares or equity in a Japanese entity (i.e., an acquisition of shares or equity in a foreign entity that owns a Japanese company) does not trigger an FDI filing requirement under the FEFTA. The new bill aims to regulate such indirect acquisitions under certain conditions, and it may require prior notification depending on the business activities of the target.
- New provisions regarding risk mitigation measures
The current regulations do not stipulate specific provisions and process regarding risk mitigation measures for foreign direct investments that may involve national security concerns, while foreign investors may be required to make certain commitments for clearance in practice. The new bill includes certain provisions to address this, for example:
- Foreign investors may need to include risk mitigation measures in a prior notification if deemed necessary.
- If the authorities find the proposed risk mitigation measures insufficient, they can issue recommendations or orders to revise such measures appropriately.
- The authorities may order appropriate risk mitigation measures if foreign investors do not propose any measures.
- If foreign investors fail to comply with the risk mitigation measures, the authorities can order necessary actions, including the sale of shares or equity acquired by the foreign investors.
- Ex-post scrutiny regarding foreign direct investments not subject to prior notification
If the authorities consider it necessary due to a change in circumstances, they can request foreign investors to provide relevant information regarding foreign direct investments that did not trigger a prior notification requirement after such investments have been implemented. The authorities can issue recommendations or orders to take necessary actions, including the sale of shares or equity acquired by the foreign investors, if it is deemed necessary from a national security perspective.
- Consultation with the Prime Minister, the Minister of Foreign Affairs, and other relevant authorities (potential moves toward a Japan-style “CFIUS-like” framework)
The primary responsible authorities for FDI review are the Ministry of Finance (MOF) and the competent ministry responsible for the targeted business. If it is deemed necessary, the responsible authorities need to consult with the Prime Minister, the Minister of Foreign Affairs, and other relevant authorities.
The new bill to amend the FDI regulations is currently under deliberation. It is expected to be passed during the current Diet session, which lasts until July 17, 2026, and to become effective within a year from promulgation. The exact timing of when the amended regulations will become effective remains uncertain.
For companies investing in Japan, there are some points to be aware of, among others.
Regarding point (a) above (indirect acquisitions), if a company considers investing in another company incorporated outside Japan that owns a Japanese subsidiary, such an investment may trigger a FEFTA filing under the amended regulations. Therefore, if there are any plans for such an acquisition (in particular, if implementation is anticipated later this year), it is recommended to monitor the timing of the effective date for the amended regulations and the closing date.
Additionally, in terms of point (b) above, if an investment in Japan may have potential national security concerns, for example, if the target business is highly sensitive from a national security perspective, the risk mitigation measures may need to be included in prior notification, and the authorities’ review period may extend beyond the initial 30 days.
