Japanese Prime Minister Sanae Takaichi [AFP Yonhap News]

Japan is preparing to amend its laws to halt foreign investment if it determines there are concerns regarding national security, as reported by the Yomiuri Shimbun on the 11th.

According to the report, the Japanese government plans to decide on the amendment to the 'Foreign Exchange and Foreign Trade Act', which tightens scrutiny of investments in Japan, at a cabinet meeting early next week.

The goal is to pass it in a special session of the Diet.

This amendment aims to prevent the outflow of crucial Japanese technologies and information overseas by establishing a system for reviewing foreign investments in cooperation with security-related ministries.

Therefore, the core of the amendment is to have a future 'Foreign Investment Review Committee for Japan' involved in the pre-screening of foreign investments in Japan.

The 'Foreign Investment Review Committee for Japan' will be composed of officials from the Ministry of Finance, the Ministry of Economy, Trade and Industry, and the National Security Secretariat (NSS), and will be established in a form similar to the U.S. Committee on Foreign Investment in the United States (CFIUS).

In addition, the amendment will mandate that the Ministry of Finance and other bodies seek opinions from relevant agencies if they determine that domestic investments by foreign investment institutions pose security concerns.

Furthermore, it includes provisions to strengthen oversight and, in principle, require prior notification when foreign companies acquire other foreign companies that hold shares in Japanese companies related to national security.

Even domestic investors under the control or influence of a foreign government will be subject to prior review.

Current Japanese laws also restrict foreign investment in Japanese companies related to national security.

While acquiring more than 1% of the shares of a Japanese company related to national security generally requires prior review by the Ministry of Finance and others, there has been only one instance where foreign investors were recommended to cease acquiring shares in Japanese companies.

The strengthening of foreign investment review is a policy that Japanese Prime Minister Sanae Takaichi emphasizes.

In particular, Prime Minister Takaichi is reportedly concerned about technology leakage to China.