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Friday June 29, 6:19 PMJapan lawmakers want tight foreign investment rulesTOKYO, June 29 (Reuters) - Japan needs stricter rules on foreign investments in areas like machinery tools and electronic parts to protect national security, a study group within the ruling party said on Friday.Although Japan's government has been trying to encourage more foreign investment, a wave of unsolicited bids from overseas funds such as Steel Partners has raised the alarms of politicians and prompted hundreds of firms to erect anti-takeover defences. One of the recommendations of the Liberal Democratic Party (LDP) study group is to force foreign companies to seek regulatory approval before bidding for Japanese manufacturers whose products are used for military purposes. The group also proposes allowing the government to block takeovers that could raise security issues. The move dovetails with plans by the Ministry of Economy, Trade and Industry (METI) to review 30 to 40 high-tech products with potential military applications to see whether foreign stakes of more than 10 percent might pose a threat to national security. "On the one hand, capital flows should be free, but given the recent rise in M&A and the emergence of new players, there is a need to think about protecting what needs to be protected in order to secure national interests," the LDP group said in a release. Japan's government has pushed through a series of reforms to open up the world's second economy to global investors, including a recent move to allow so-called "triangular" mergers, in which a foreign company's Japanese subsidiary can use its parent company's shares to buy a local company. But METI has argued that stricter rules are needed to prevent technologies that can be used for military purposes from getting into the wrong hands, and that they would only bring Japan in line with practices in Europe and the United States. METI's list is expected to include certain types of carbon fibres, optic fibre, steel, machine tools, measuring equipment and supercomputers -- as well as sectors like arms, nuclear power equipment and aircraft that are already subject to controls. Such products are made by big Japanese electronics, machinery and basic materials firms, such as Mori Seiki Co. , Fanuc Ltd. , Nippon Steel Corp. , Daido Steel Co. and Toray Industries Ltd. . The steps by METI and now the LDP will likely add to the sentiment that Japan is still a difficult market for foreign companies and overseas funds to crack. Steel Partners and several other foreign funds failed this week in attempts to make inroads with their investments. Many pushed for higher dividends and contested the proliferation of anti-takeover defences, commonly called poison pills. One, Harbinger Capital, was looking to block a merger between Doutor Coffee Co. and Nippon Restaurant System that it said was conceived hastily by Doutor simply because it did not want to be taken over by the foreign fund. "It is difficult to invest in Japan," Eli Benson, vice president at Harbinger Capital, said on Thursday. "It seems like there's a clash. Currently the administration talks a lot about opening up investments to foreign companies and increasing foreign direct investment, but if legally it's very difficult to do, then something has to give." |
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