Japan to restrict foreign ownership of companies in the IT, telecom sectors

TOKYO (Reuters) – the japanese government said Monday that the high-tech industries will be added to a list of firms in foreign ownership of Japanese companies is limited.

A man uses his smartphone next to a traditional Japanese Taiko drum during A man uses his smartphone next to a traditional Japanese Taiko drum during the preprartion for the next Kanda festival in Tokyo, Japan, May 10, 2019. REUTERS/Issei Kato

The new rule, effective Aug. 1, comes to middle of the increase of the pressure of the United States in dealing with cyber-security risks and technology transfers with China.

The Japanese government made no mention of specific countries or companies that are affected by the application of existing foreign ownership restrictions in the it and telecommunications industry.

The announcement came on the same day a visit to the AMERICAN President Donald Trump and the Japanese Prime minister shinzo Abe hold talks in Tokyo on trade and other issues.

The United States has warned countries against the use of Chinese technology, saying: Huawei Technologies can be used by Beijing to spy on the West. China and Huawei have strongly rejected the accusations.

“On the basis of the rising importance of cyber security in the past few years, we have decided to take the necessary steps, including the addition of a integrated circuit production, from the point of view of the prevention if the right situation that will have serious consequences for japanese national security,” Japanese ministries said in a statement.

Japan wants to prevent a leakage of technology is deemed important for the national safety, or of damage to the defense of the output and technological basis, they will be added.

The new rule will be applied to 20 sectors in the information and communication industry, according to the joint declaration of the ministry of finance, ministry of commerce and communications of the ministry.

Under the foreign exchange and foreign trade control law, Japan brings with it certain industries, such as aircraft, nuclear-related industries and arms production under foreign capital controls.

The law requires foreign investors to report to the Japanese government, and inspection to undergo in case they buy 10% or more of the shares in Japanese-listed companies or the acquisition of shares of non-listed companies.

If the government finds deficiencies, it can to foreign investors to change or cancel their investment plans.

Reporting by Leika Kihara; Editing by Chris Gallagher and Richard Borsuk

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