Series
Blogs
“J-CFIUS” reforms are here — reshaping Japanese foreign investment control
“J-CFIUS” reforms are here — reshaping Japanese foreign investment control
18 June 2026
Series
Blogs
18 June 2026
Authors: Yoshiyuki Asaoka, Kenji Shimada, Marcus Pollard, Ayako Nagashima
Japan’s Diet has now passed amendments to the Foreign Exchange and Foreign Trade Act (FEFTA). It is the most ambitious overhaul of foreign investment control in Japan to date. The amendments were promulgated on 5 June — with most changes to be implemented within one year. Below we set out some of the key changes, and the impact they will have on overseas investors.
1. Cross-agency “whole of government” review framework (“J-CFIUS”) (now in force)
The reforms have introduced a cross-agency review framework for the first time. The Minister of Finance and other sector-relevant ministers will have to — where necessary — seek the views of the Prime Minister, the Minister of Foreign Affairs and any other relevant ministries, to assess whether a transaction raises sensitive national security concerns.
While there are not yet any further details on how this review framework will work in practice, it is notable that Japan has opted for a cross-ministerial review process instead of a centralised “CFIUS”-style body, which could have created a more streamlined review process. Investors can expect greater dialogue within government — which may risk prolonging the approval timeline compared to what used to be more straightforward engagement with a single Ministry.
2. Capturing indirect acquisitions and lower threshold for High-Risk Foreign Investors
Currently, indirect acquisitions by foreign companies do not trigger a mandatory pre-closing approval. Under the reforms, the acquisition of 50% or more of the voting rights in a non-Japanese entity that directly holds shares in a Japanese company in a designated sector will now be captured.
Given the uniquely low threshold under the current FDI regime (1% for listed companies or one share for private companies), this could have a non-negligible impact on deals involving a non-Japanese target, depending on how the indirect investment is structured. According to the government’s discussion, the low threshold of 1% for listed companies (and any share for non-listed companies) is expected to be applied only to “High-Risk Foreign Investors” which include sovereign wealth funds or foreign state-controlled entities, and the threshold of 50% (for both listed and non-listed companies) is expected to be applied to non High-Risk Foreign Investors. However, this has not been confirmed yet and more detail on this review process will be forthcoming in future Cabinet Orders.
3. Remedies will be able to be part of the approval process
Under the current regime, investors must typically withdraw their notification and resubmit a new one, if they want to include remedy commitments as a condition to approval. The reforms will enable investors to more practically engage with the government on remedies, where necessary, and propose “risk mitigation measures” during the review process.
The relevant Ministry will also have clearer powers to recommend or order the adoption/revision of mitigation measures or, ultimately, the disposal of the relevant investments where mitigation measures are not properly implemented. By formally codifying risk mitigation measures in the FEFTA framework, these amendments could improve the pace and predictability of the regime, allowing parties to remedy concerns earlier in the review process.
4. Deemed foreign investor / nominee arrangements
Although the regime already captures some domestic entities investing on behalf of non-Japanese residents, the scope of capture is now expanded. This amendment is intended to ensure that nominee or similar arrangements are not used to circumvent FEFTA rules. This will likely result in an increased number of notifications.
While the detailed specific types of arrangements covered will be clarified by Cabinet Orders, the following categories will be captured: (i) investments made pursuant to a contract, foreign law or regulation, or similar arrangement with a foreign investor; and (ii) investments made by a person in a “special relationship” with a foreign investor — such as a relationship based on share ownership, family ties, employment, or other relationships too. It is also expected that the scope of this requirement will be limited to foreign entities considered to be “High-Risk Foreign Investors”.
5. Introducing ex-post-facto monitoring for non-notifiable deals
The reforms also add another weapon to the FEFTA arsenal: an ex-post-facto monitoring mechanism for non-notifiable deals. Previously, certain acquisitions were subject to an ex-post notification only, i.e. approval was not required.
Under the reforms, if national security risks are identified post-closing, the relevant Ministry may now require the transaction to be reviewed and may then recommend or order the disposal of the relevant investment, or impose other interim or permanent mitigation measures (including an order not to make any further investments).
While this provision extends the risk of reporting and divestment orders for previously non-notifiable deals, the scope of this may be limited to “High-Risk Foreign Investors” acquiring 10% or more and/or a 5-year limitation period. Further clarification on the types of transactions covered is expected to be provided by forthcoming Cabinet Orders.
The Takaichi government’s reforms signal a desire to converge investment control with other G7 nations. It reflects a belated willingness to tighten enforcement and close gaps that could leave Japan exposed to national security risks. However, at the same time the government has increased its 2030 foreign investment target by 20% — reflecting the recent rush of foreign capital in acquiring local targets. These changes therefore aim to walk a fine balance — Japan, Inc is very much open for business but foreign investments that threaten national security will be on the radar for enhanced scrutiny.
Draft amendments to the relevant regulations and supplementary guidance (including Cabinet Orders) will be published shortly for public comment. The outstanding amendments will then enter into force on a date to be specified — no later than 5 June 2027.