By Shingo Hattori — Founder & Managing Partner, Hattori Law
Tel: +81 3 6447 5586
Japan’s Foreign Exchange and Foreign Trade Act (FEFTA) imposes strict reporting rules on foreign investors. Even small share purchases can trigger filings: for example, acquiring as little as 1% of a listed company now requires pre‑notification. Foreign investment in certain “sensitive” industries (e.g. defense, energy, high-tech) mandates prior government approval, and post-closing notification is required for non-residents buying land (within 45 days). The 2022 Act on the Review and Regulation of the Use of Real Estate Surrounding Important Facilities and on Remote Territorial Islands (“REIRA”)adds a location-based review: any purchase of real estate within ~1,000 meters of designated facilities (self-defense bases, power plants, etc.) must be reported to the Prime Minister in advance. Failure to comply can lead to corrective orders or penalties, and transactions may be unwound if national security is implicated. Due diligence should therefore map the target’s business and property locations to any FEFTA or the above law’s “monitored area.”
FAQs:
Japan requires advance notice when a foreign investor acquires ≥1% of a listed Japanese company (down from 10% in 2020), or any equity in an unlisted company in a designated sector. In all other real-estate acquisitions by non-residents, a post-closing notice suffices.
Direct purchase of property by a non‑resident triggers only post-transaction FEFTA filing, not pre-approval, unless it involves shares in a sensitive business. However, buying land near a restricted facility triggers the REIRA’s mandatory prior notice.
Defines “Monitored Areas” as roughly a 1,000-meter radius around defense installations, critical infrastructure and remote islands. Any acquisition of land or buildings in these zones must be reported to the Prime Minister before closing.
Non-compliance of FEFTA can result in administrative fines, orders to restructure or cancel the deal, and (in extreme cases) criminal liability. The Japanese government can prohibit or unwind transactions that did not receive required pre‑clearance.
Shingo Hattori
Founder & Managing Partner, Hattori Law +81 3 6447 5586
Daini Tokyo Bar Association
Disclaimer: This article provides general information as of the time of drafting only and does not constitute legal advice. Specific advice requires review of transaction documents and facts.