A car factory in Aichi Prefecture, Japan. AFP

Japan announced on Friday a list of its firms subject to tighter foreign ownership rules, including majors such as Toyota Motor Corporation and Sony Corporation, as the United States and Europe step up scrutiny of industries key to national security.

Japan identified 518 of its roughly 3,800 listed firms as having operations core to national security, making them targets for stringent regulations, a list released by the Ministry of Finance (MOF) showed.

The tighter rules covering foreign investment in a dozen sectors crucial to national security, such as oil, railways, utilities, arms, space, nuclear power, aviation, telecoms and cyber security, take effect from Friday.

Foreign investors buying a stake of 1% or more in Japanese firms in the 12 areas now face pre-screening in principle, compared with the previous threshold of 10%.

“The revised law is aimed at accelerating foreign direct investment in Japan,” said Finance Minister Taro Aso, referring to a law passed in November, and adding that technology and patents needed protection from a national security standpoint.

“As we have explained our intention overseas, misdirected criticism such as that we may limit foreign investment in Japan has disappeared.”

Some analysts say the revised law reflects Tokyo’s concern over China’s growing influence in industries such as defence, running the risk of leaks of confidential information and outflows of key technology.

However, critics have argued the regulation discourages foreign investors in Japan’s stock market, and runs counter to government efforts to lure investment to revitalise the economy.

Exemptions to allay such concerns include investment without pre-screening by foreign financial institutions, and the waiver of pre-reporting requirements for certified sovereign wealth funds and other investors who meet certain criteria.

Foreign investors have a huge influence on share prices as they own about 30% of Japan’s roughly 575-trillion-yen stock market, and make up about 60% of trading turnover.

As Japan prepares to ease coronavirus restrictions in some parts of the country, a growing number of the country’s businesses are planning to resume operations despite concerns that isolation guidelines were being lifted too early.

After a monthlong shutdown brought economic activity to a grinding halt, Economy Minister Yasutoshi Nishimura said on Friday that the government was looking at ways to bring some parts of the country out of lockdown measures as the rate of infections has slowed in several outlying regions.

“The number of new infections of the coronavirus is significantly falling,” he told reporters. “There are more prefectures with no new coronavirus cases, so lifting the state of emergency is within sight.”

Reuters