Foreign investors may generally purchase shares in Japanese companies without significant difficulty. However, the applicable regulatory requirements depend on the nature of the investor, the business sector of the target company, and the purpose of the investment.
This overview summarizes the main Foreign Exchange and Foreign Trade Act (“FEFTA”) categories relevant to investment funds whose investments are purely financial and that have no affiliation with foreign governments or sanctioned countries. As a general rule, if the target company falls within Category 2, 3, or 4 below, a prior notification is required.
① Companies conducting business activities only in non-designated business sectors (subject to post-investment report only);
② Companies conducting business activities in designated business sectors other than core sectors; or
③ Companies conducting business activities in core business sectors
④ Companies which fall under ③ above, and are also designated as ‘Specified Essential Infrastructure Service Providers’ as of 14 July 2025 under the Economic Security Promotion Act (so-called ‘Designated Core Business Entities’ under FEFTA)
If the target company is a listed company, an exemption of pre-notification could be used if it falls under Category 2 and 3.
While even though it is possible to use the exemption, it requires post-investment reporting to the Bank of Japan within 45 days after purchasing the Japanese company shares if the foreign investor purchases 1%, 3% or 10 %.
There is EDINET (Electronic Disclosure for Investors’ Network) for reporting holding a plenty of shares of the Japanese company. This system was built with modeling EDGAR in US. You need to register your status if you have purchased more than 5% shares of the target company.
If the target company is unlisted, an exemption from prior notification may be available for Category 2 companies, subject to meeting the applicable conditions. If the target company falls within Category 3, prior notification is generally mandatory. Where an exemption is used, post-investment reporting may still be required regardless of the investor’s shareholding ratio or voting rights ratio.
The requirements can be complex, and the process is time sensitive. It is best to confirm the applicable rules in advance to avoid any compliance issues.
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.