2019年6月8日 星期六

Regulation on foreign-capital to be expanded in IT field - to prevent technology outflow with China in mind

Recently Nihon Keizai Shimbun Electronic Edition reported the following:
IT分野で外資規制拡大 中国念頭に技術流出防止
2019/5/9 18:00日本経済新聞 電子版








2019/5/9 18:00 Nihon Keizai Shimbun Electronic Edition

The Ministry of Finance together with the Ministry of Economy, Trade and Industry would expand restrictions on foreign capital in the IT (Information Technology) field by the middle of 2019. If based on the Foreign Exchange and Foreign Trade Act​ it was determined that there was a threat to Japan's safety in manufacturing and software development such as mobile phones, PCs and semiconductor memories, the foreign investment plan would be discontinued. It would be a measure on cyber security and on preventing technology leakage with China in mind, and to keep pace with the United States which had strengthened its firm stance.

From the viewpoint of security in the foreign exchange and trade laws, investment restrictions had been set up in specified industries such as those aircraft and nuclear related, and in the manufacturing of weapons. Manufacturing industries such as integrated circuits and semiconductor memories were added to this targeted industry. It was expected that 20 industries would be added, including software development and information processing services.

Specifically, when foreign investors acquired 10% or more of the listed companies in the target industry, or acquired shares of non-listed companies, it would be necessary to make a prior notification to the country and a review would be required. If problems were found, the government could ask foreign investors to change or cancel the plan. For example, investments in companies and their related companies in the type of enterprise such as Hitachi, NEC, and Panasonic were in mind.

With the trend of digitization and globalization, foreign investors were also essential to the survival of Japanese companies. Recently, Japan Display (JDI) had decided to become a subsidiary of the Taichung Union, and Toshiba Memory was sold to some Japan-US-Korea alliance such as Bain Capital. This measure aimed to show the government's stance to intervene quickly when it was determined that there were major problems in the acquisition and investment by foreign investors.

In the United States and Europe, too, restrictions on inward investment had been tightened in cyber regulations, and in the prevention of technology leaks in the IT field. As such there was a meaning of correcting a situation where Japan could become a loophole.

US President Trump had signed a new law in August 2018 to strictly screen foreign investment in the US with China in mind. For security reasons, it was intended to further restrict the investment of state-owned enterprises and the like into the US over important technologies and infrastructures of the United States, aiming on further restricting the acquisition of technology by Chinese companies which were competing for leadership in the high-tech field. Full-scale application would be in effect by February 2020.

In 2008, for the first time the government based on the foreign exchange laws issued an order to stop a plan of the Children's Investment Fund (TCI), a British investment fund in trying to buy more J-power shares. Japan emphasized freedom of investment and had been careful in enforcing the regulations. But because the nuclear power business was judged to be important, the power of the state was exercised.

           The worries of Japan over technology leakage is understandable. Japanese enterprises such as Hitachi, NEC, and Panasonic are important asset to Japan.