Foreign Exchange and Foreign Trade Act

Before a foreign investor (meaning a foreign investor as provided in paragraph (1) of the preceding Article; hereinafter the same applies, except in the following Article, Article 28-2 and Article 29, paragraph (7)) conducts an inward direct investment or equivalent action (meaning an inward direct investment or equivalent action provided for in paragraph (2) of the preceding Article, and excluding an inward direct investment or equivalent action prescribed by Cabinet Order in consideration of inheritance, bequest, merger of a corporation, or any other circumstances; hereinafter the same applies, except in the following Article, Article 29, paragraph (7), Article 29-2 and Article 69-4) prescribed by Cabinet Order as being likely to constitute one that necessitates an examination under paragraph (3), the foreign investor, pursuant to the provisions of Cabinet Order, must first file a notification of the following matters (limited, as for the matter stated in item (ii), to the case where the inward direct investment or equivalent action that the foreign investor is to conduct falls under an action prescribed by Cabinet Order as one of the actions stated in the items of paragraph (2) of the preceding Article for which the amount relating to the action can be calculated, and as for the matter stated in item (iv), to the case where the foreign investor takes the measure relating to national security or a similar concern provided for in that item) concerning that inward direct investment or equivalent action with the Minister of Finance and the competent minister for the business:

the purpose of the business prescribed in each of (a) through (e) in accordance with the category of inward direct investment or equivalent action stated in (a) through (e):

the actions stated in Article 26, paragraph (2), items (i) through (v) and the actions stated in Article 26, paragraph (2), item (xi) (limited to actions prescribed by Cabinet Order as equivalent to the actions stated in Article 26, paragraph (2), items (i) through (v); the same applies hereinafter in this (a)): the business of a company (excluding a listed or equivalent company) provided for in Article 26, paragraph (2), items (i) through (v), or of a listed or equivalent company (or, for the actions stated in Article 26, paragraph (2), item (xi), something equivalent to these);

the action stated in Article 26, paragraph (2), item (vi) and the actions stated in Article 26, paragraph (2), item (xi) (limited to actions prescribed by Cabinet Order as equivalent to the action stated in Article 26, paragraph (2), item (vi); the same applies hereinafter in this (b)): the business of a branch office or other such place of business provided for in Article 26, paragraph (2), item (vi) (or, for the actions stated in Article 26, paragraph (2), item (xi), something equivalent to this);

the action stated in Article 26, paragraph (2), item (vii) and the actions stated in Article 26, paragraph (2), item (xi) (limited to actions prescribed by Cabinet Order as equivalent to the action stated in Article 26, paragraph (2), item (vii); the same applies hereinafter in this (c)): the business of a corporation that has its principal office in Japan provided for in Article 26, paragraph (2), item (vii) (or, for the actions stated in Article 26, paragraph (2), item (xi), something equivalent to this);

the action stated in Article 26, paragraph (2), item (viii) and the actions stated in Article 26, paragraph (2), item (xi) (limited to actions prescribed by Cabinet Order as equivalent to the action stated in Article 26, paragraph (2), item (viii); the same applies hereinafter in this (d)): the business succeeded to through the succession to a business provided for in Article 26, paragraph (2), item (viii) (or, for the actions stated in Article 26, paragraph (2), item (xi), something equivalent to this);

the actions stated in Article 26, paragraph (2), items (ix) and (x) and the actions stated in Article 26, paragraph (2), item (xi) (limited to actions prescribed by Cabinet Order as equivalent to the actions stated in Article 26, paragraph (2), items (ix) and (x); the same applies hereinafter in this (e)): the business of a company (excluding a listed or equivalent company) provided for in Article 26, paragraph (2), item (ix), (a) through (c) or item (x), (a) through (c), or of a listed or equivalent company (or, for the actions stated in Article 26, paragraph (2), item (xi), something equivalent to these);

the amount of that inward direct investment or equivalent action;

the timing of the execution of that inward direct investment or equivalent action;

a restriction on the involvement of that foreign investor in the management of the company relating to that inward direct investment or equivalent action, or any other measure to eliminate the risk of that inward direct investment or equivalent action giving rise to either of the situations stated in paragraph (3), item (i), (a) or (b) (hereinafter referred to as a "measure relating to national security or a similar concern");

any other matters prescribed by Cabinet Order.

A foreign investor that has filed a notification under the preceding paragraph with regard to inward direct investment or an equivalent action must not undertake the inward direct investment or equivalent action that is subject to that notification during the period until the final day in the 30-day period that starts on the date that the Minister of Finance and the competent minister for the business receive the notification; provided, however, that on finding, before the end of this period, that, in light of the purpose of the business provided for in item (i) of that paragraph or any other consideration, the inward direct investment or equivalent action that is subject to that notification does not constitute one necessitating an examination under the following paragraph, the Minister of Finance and the competent minister for the business may shorten this period.

When a notification under paragraph (1) has been filed, on finding it necessary to examine whether the inward direct investment or equivalent action that is subject to that notification falls under one of the following categories of inward direct investment or equivalent action (hereinafter referred to as "inward direct investment or equivalent action that is a matter of national security or a similar concern"), the Minister of Finance and the competent minister for the business may, pursuant to the provisions of Cabinet Order, extend the prohibition period (meaning the period prescribed in the main clause of the preceding paragraph that relates to that notification; hereinafter the same applies in this Article and Article 27-3), but only until the final day in the four-month period that starts on the day on which the notification is received:

inward direct investment or an equivalent action that is likely to cause one of the situations stated in (a) or (b) (but only inward direct investment or an equivalent action that is undertaken by a foreign investor from a member state of a multilateral treaty or other international agreement on inward direct investment and equivalent actions that Cabinet Order prescribes and to which Japan has acceded (hereinafter referred to as a "treaty or other agreement" in this item), if there is no obligation to remove restrictions on that inward direct investment or equivalent action based on the treaty or other agreement; as well as inward direct investment or an equivalent action that is undertaken by a foreign investor from a state other than the member state of such a treaty or other agreement, if there would be no obligation to remove restrictions on the inward direct investment or equivalent action if the state in question were a member state of the treaty or other agreement):

it would compromise national security, interfere with the maintenance of public order, or create an obstacle to the preservation of public safety; or

it would have a significant adverse effect on the smooth operation of the Japanese economy;

inward direct investment or an equivalent action that, because it is undertaken by a foreign investor from a state with which Japan has not concluded any treaty or other international agreement on inward direct investment and equivalent actions, it is found necessary to modify the substance of or to discontinue, in order to harmonize its treatment, in real terms, with the treatment of direct investment and equivalent actions that Japanese investors undertake in that state (meaning direct investment and equivalent actions that are equivalent to inward direct investment and equivalent actions as stated in the items of paragraph (2) of the preceding Article); or

inward direct investment or an equivalent action which it is found necessary to modify the substance of or discontinue because all or a part of the inward direct investment or an equivalent action constitutes a capital transaction for which it has been made obligatory to get permission pursuant to the provisions of Article 21, paragraph (1) or (2) in light of the use of funds and other circumstances.

If the Minister of Finance and the competent minister for the business have extended the prohibition period pursuant to the provisions of the preceding paragraph, but they find, as a result of the examination under that paragraph and before the expiration of the extended prohibition period, that the inward direct investment or equivalent action stated in the notification under paragraph (1) does not fall within the scope of an inward direct investment or equivalent action that is a matter of national security or a similar concern, they may shorten the extended prohibition period.

If the Minister of Finance and the competent minister for the business have extended the prohibition period pursuant to the provisions of paragraph (3), but they find, as a result of the examination under that paragraph, that the inward direct investment or equivalent action stated in the notification under paragraph (1) falls within the scope of an inward direct investment or equivalent action that is a matter of national security or a similar concern, the ministers may recommend the person that filed the notification of the inward direct investment or equivalent action to change the substance of the investment or action, to make a modification of a measure relating to national security or a similar concern (meaning filing with the Minister of Finance and the competent minister for the business a notification of modification concerning the matters stated in item (iv) of that paragraph in the notification in question; the same applies hereinafter), or to discontinue the investment or action, after hearing the opinions of the Council on Customs, Tariffs, Foreign Exchange, and Other Transactions; provided, however, that the period during which the ministers may recommend the change, the modification of a measure relating to national security or a similar concern, or the discontinuance ends on the final day of the prohibition period extended pursuant to the provisions of paragraph (3), the following paragraph, or Article 27-3, paragraph (2).

Notwithstanding the provisions of paragraph (3) or Article 27-3, paragraph (2), if the Minister of Finance and the competent minister for the business hear the opinions of the Council on Customs, Tariffs, Foreign Exchange, and Other Transactions pursuant to the provisions of the preceding paragraph, but the Council informs them that, in light of the nature of the case, it will be difficult for the Council to state its opinions within the period until the final day in the four-month period that starts on the date on which the notification under paragraph (1) is received (or, where the prohibition period has been extended beyond that period pursuant to the provisions of Article 27-3, paragraph (2), the period until the day on which the extended prohibition period expires), the prohibition period is the period until the final day in the five-month period that starts on the date on which the notification under paragraph (1) is received (or, where the prohibition period has been extended pursuant to the provisions of paragraph (2) of that Article beyond the period until the final day in the four-month period that starts on the date on which the notification under paragraph (1) is received, the period until the final day in the one-month period that starts on the day following the day on which the extended prohibition period expires).

A person that is issued a recommendation under paragraph (5) must notify the Minister of Finance and the competent minister for the business of whether the person will comply with the recommendation, within 10 days from the day on which the person is issued it.

A person that has notified the Minister of Finance and the competent minister for the business of compliance with the recommendation pursuant to the provisions of the preceding paragraph must undertake the inward direct investment or equivalent action, or make the modification of a measure relating to national security or a similar concern, that is subject to the recommendation in accordance with the recommendation.

Notwithstanding the provisions of paragraph (3) or (6) or Article 27-3, paragraph (2), a person that has notified the Minister of Finance and the competent minister for the business of compliance with the recommendation pursuant to the provisions of paragraph (7) may undertake the inward direct investment or equivalent action that is subject to the recommendation even before the expiration of the prohibition period extended pursuant to these provisions.

If a person that has been issued a recommendation under paragraph (5) fails to notify the Minister of Finance and the competent minister for the business as under paragraph (7) or notifies them of non-compliance with the recommendation, the Minister of Finance and the competent minister for the business may order the person to change the substance of the inward direct investment or equivalent action, to make a modification of a measure relating to national security or a similar concern, or to discontinue the inward direct investment or equivalent action; provided, however, that the period during which the ministers may issue an order to change, to make the modification of a measure relating to national security or a similar concern, or to discontinue this ends on the final day of the prohibition period as extended pursuant to paragraph (3) or (6) or Article 27-3, paragraph (2).

If the Minister of Finance and the competent minister for the business find that, because of a change in economic conditions or for any other reasons, the inward direct investment or equivalent action stated in a notification under paragraph (1) has ceased to fall within the scope of an inward direct investment or equivalent action that is a matter of national security or a similar concern, they may rescind all or a part of the recommendation issued to a person that has notified them of compliance with the recommendation to change the substance of the inward direct investment or equivalent action or to make a modification of a measure relating to national security or a similar concern under paragraph (7), or may rescind all or a part of the order issued to a person that has been ordered to change the substance of the inward direct investment or equivalent action or to make a modification of a measure relating to national security or a similar concern pursuant to the provisions of the preceding paragraph.

Beyond as provided in paragraphs (5) through (11), Cabinet Order prescribes the procedures for recommending and ordering, under these provisions, a change to the content of an inward direct investment or equivalent action, a modification of a measure relating to national security or a similar concern, or the discontinuance of an inward direct investment or equivalent action, and provides for other necessary particulars in connection with these recommendations and orders.

Assets and rights that a partner of a specified partnership or similar organization (or a member of an organization similar to a specified partnership; the same applies hereinafter) acquires through an action that is comparable to the inward direct investment or equivalent action that the specified partnership or similar organization undertakes are deemed to be acquired, owned, or held by the specified partnership or similar organization, and the provisions of the preceding paragraphs, Article 27-3, Article 27-4, and Article 29, paragraphs (1) through (6) and (9) apply.

A person (including a corporation or any other organization) not constituting a foreign investor is deemed to be a foreign investor in connection with any of the following actions, among the actions comparable to an inward direct investment or equivalent action which that person conducts on behalf of a person stated in the items of paragraph (1) of the preceding Article (hereinafter referred to as a "non-resident, etc.") but not in the name of that non-resident, etc., and the provisions of paragraphs (1) through (12), Article 27-3, Article 27-4, and Article 29, paragraphs (1) through (6) and (9) apply:

an action conducted for the account of that non-resident, etc.;

an action conducted based on a contract or on the laws and regulations of a foreign country or anything similar (limited to an action prescribed by Cabinet Order, and excluding an action stated in the preceding item);

an action conducted by a person that has, with that non-resident, etc., a permanent economic relationship based on ownership of shares, a familial relationship, an employment relationship, or any other special relationship prescribed by Cabinet Order (limited to an action prescribed by Cabinet Order, and excluding an action stated in the preceding two items).