FEFTA’s sector concepts aren’t just labels. They determine whether prior notification and screening are likely, and whether any exemption might exist in listed-company deals. The Ministry of Finance publishes a listed-company classification list to help investors manage risk. This is useful, but not definitive.
FEFTA’s screening logic is sector-driven: the question of which sector your target investment is in is the starting point for determining whether prior notification and screening will be required. From “non-designated business sectors” to “designated business sectors” to “core business sectors” to “designated core business entities”, there are increasingly heightened pre-notification and screening requirements, and exemptions become less available.
Category 1 — Non-Designated Business Sectors (baseline)
The Ministry of Finance’s listed-company list explicitly includes a category for companies operating only in non-designated business sectors. This is a “default” category, until facts show that the activities of the target company indicate another category is appropriate.
Category 2 — Designated Business Sectors (Other than Core)
Defined by the Ministry of Finance as sectors classified through public notice where inward investment may implicate national security / public order / public safety, etc.
Category 3 — Core Business Sectors
The Ministry of Finance defines core business sectors as specific industries classified from a national security viewpoint through public notice.
Category 4 — Designated Core Business Entities
These are companies which have been classified as “essential infrastructure service providers” that conduct business activities in core business sectors.
Category 1: Non-Designated Business Sectors
These are companies conducting business activities only in non-designated business sectors. Even though the list exists, care is still required, as conglomerates and mixed business lines can push a company into designated/core business sectors even if the headline business sounds benign. For example, Ajinomoto Co., Ltd., is a company famous for producing seasonings and other food products in Japan. Nevertheless, it is classified as a core sector business by the Ministry of Finance.
Category 2: Designated (Non-Core) Business Sectors
Designated business sectors are the first escalation point under FEFTA. These are industries that the government has identified through public notice as raising potential concerns for national security, public order, or public safety. Japan recognizes 1,465 “standard industrial classifications”; of these, 155 are considered designated business sectors or core business sectors under FEFTA as of July 15, 2025.
This category includes the following sectors: heat supply, broadcasting, public bus services, biological and chemical industries, security services, agriculture, forestry and fisheries, leather manufacture, aviation transportation, and maritime transportation.
Category 3: Core Business Sectors
The Ministry of Finance defines core business sectors as specific industries classified through public notice from a national security viewpoint. The list of core business sectors has expanded since this category was first created in consideration of maintaining secure stable supply chains and preventing technology from being misused.
This category includes the following sectors: weapons, aircraft (including drones), nuclear facilities, space, dual-use technologies, manufacturing of pharmaceuticals related to communicable diseases, specially controlled medical device manufacturing, mining of critical minerals, and certain construction businesses which improve or maintain certain port facilities.
The following business sectors are split between designated business sector and core business sector classification status, depending on the nature of the business conducted: cybersecurity-related, electricity, gas, telecommunications, water supply, petroleum, and railway. Because the intent of FEFTA is to apply screening as narrowly as possible to protect national security and economic stability, core business sector classification is applied to only parts of some sectors.
Category 4: Designated Core Business Entities
The designated core business entity classification is a bit different in that it is applied entity by entity rather than applied to an entire sector, and strictly speaking it is a subsection of the core business sector classification. In addition, the classification is based on a separate statute: the Economic Security Promotion Act. This category was created to prevent essential infrastructures from being misused to disrupt the stable provision of services from outside Japan. As of July 2025, 46 listed companies are classified by the Ministry of Finance as designated core business entities.
Step 1 — Use the Ministry of Finance “classification list” as your first-pass triage tool
The Ministry of Finance publishes an excel list of classifications of listed companies intended to assist investors. However, this list is based on survey data as of the date that the list was created and classification may differ at the time of investment; investors must still determine actual classification. In addition, care must be taken to ensure that the latest list is being used, as a simple google search may provide an outdated list. (As of the date of this article, the latest list is dated July 15, 2025).
Step 2 — Consider the business activities (not just the company label)
Identify business lines that might fall into the four business sector categories that differ from how the company is presented in the Ministry of Finance classification list. It’s also very important to recognize that the classification of a parent company is determined based on the entirety of its business activities, including those of its subsidiaries.
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.