Acquiring or Investing in a Japanese Company: Prior Notification and Post-Investment Reports under Japan's Foreign Exchange Act

When a foreign company buys shares in a Japanese company, the first step is to check the procedures under the Foreign Exchange and Foreign Trade Act (FEFTA). If the target operates a business in a designated sector, prior notification is generally required, and the investment may not be made until 30 days have passed from the date the notification is accepted (FEFTA, Article 27(1) and (2)). Even where the target is outside the designated sectors, a post-investment report may be due within 45 days (Article 55-5(1)). For an unlisted company, acquiring a single share can be enough to trigger these rules, so even small deals should be checked before the timetable is fixed.

• Your parent company is negotiating to buy a majority stake in a Japanese software developer from its founder.
• A foreign fund plans a minority investment in an unlisted Japanese parts manufacturer and assumes that a small stake needs no filing.
• You want to set the signing and closing dates of a share purchase agreement but do not know how long FEFTA screening will take.
• After the acquisition, you want to place executives from headquarters on the Japanese company's board.

FEFTA procedures apply to "foreign investors". These include non-resident individuals, and corporations and other entities established under foreign law or having their principal office abroad (FEFTA, Article 26(1)(i) and (ii)).

A company in which such persons hold 50% or more of the voting rights, directly or indirectly, is also a foreign investor (Article 26(1)(iii)). So are entities in which non-resident individuals make up a majority of the officers, and certain investment partnerships (Article 26(1)(iv) and (v)).

In practice, this means a Japanese company can be a foreign investor. If the buyer is a wholly owned Japanese subsidiary of a foreign parent, the same analysis applies. Setting up an acquisition vehicle in Japan does not take the deal outside FEFTA.

The following acts by a foreign investor are "inward direct investment, etc." (FEFTA, Article 26(2)):

• Acquiring shares or equity interests in a company that is not listed (Article 26(2)(i))
• Acquiring shares in a listed company where the holding, together with closely related persons, reaches 1% or more (Article 26(2)(iii); Cabinet Order on Inward Direct Investment, Article 2(8)). The 1% threshold also applies to acquiring voting rights (Article 26(2)(iv); Cabinet Order, Article 2(10))
• Consenting to matters with a material effect on management, such as a substantial change in business purpose (Article 26(2)(v)). The Ministry of Finance gives the example of consenting to the appointment of the foreign investor or its related persons as directors or company auditors
• Establishing a branch or similar office in Japan (Article 26(2)(vi))
• Taking over a business from a Japanese corporation, including by absorption-type split or merger (Article 26(2)(viii))

There is no 1% threshold for unlisted companies. The Ministry of Finance's overview states that, for unlisted companies, acquiring one share or more (including fractional shares) is subject to prior notification. A small minority stake does not by itself remove the need to file.

Buying unlisted shares from another foreign investor is a separate category called a "specified acquisition" (Article 26(3)), which has its own prior notification regime (Article 28(1)). If the seller is a foreign company or fund, confirm which category applies first.

Whether prior notification is needed depends mainly on the target's business and on the investor's nationality or location.

Investments in companies operating businesses in sectors designated from the standpoint of national security and related interests require prior notification (FEFTA, Article 27(1); Cabinet Order, Article 3(2)(i)). The sectors are set out in a public notice issued by the Minister of Finance and the ministers with jurisdiction over each business (Ministerial Order on Inward Direct Investment, Article 3(3)). Examples listed in the Ministry of Finance's overview include:

• Manufacturing related to weapons, aircraft, space and nuclear power, and manufacturing of dual-use items
• Manufacturing of semiconductor equipment, storage batteries, machine tools and industrial robots
• Manufacturing of information processing equipment, parts and software, and information services
• Infrastructure sectors such as electricity, gas, telecommunications, water supply, railways, oil, broadcasting and passenger transport
• Security services, agriculture, forestry and fisheries, air transport and maritime transport

Whether a business falls within a designated sector depends on what the company actually does, not only on the business purposes in its articles of incorporation. Businesses operated by the target's subsidiaries are included. The Bank of Japan's FEFTA Q&A states both points expressly. Software and information services are broad categories, so investments in technology companies need particular care.

If the investor's nationality or location is not one of the countries or regions listed in Appended Table 1 of the Ministerial Order, prior notification is required whatever the target's sector (Ministerial Order, Article 3(5)). The table is published on the Ministry of Finance website.

For listed companies, the Ministry of Finance publishes a list classifying Japanese listed companies by whether prior notification is required. The Ministry stresses, however, that investors are in principle responsible for deciding for themselves whether a filing is needed, and that the list is only an aid.

No such list exists for unlisted companies. You need to find out what the target and its subsidiaries actually do and compare that with the public notice. The Ministry's guidance for investee companies asks companies in designated sectors to tell foreign investors so when they receive investment.

Prior notification must be made within six months before the planned date of the investment (Cabinet Order, Article 3(3)). The notification is submitted to the Minister of Finance and the competent ministers through the Bank of Japan (Ministerial Order, Article 3(7)). The Bank of Japan encourages filing through its online system.

A foreign company or a non-resident individual must file through an agent who is resident in Japan (Cabinet Order, Article 3(4)). Overseas buyers should appoint their Japanese agent early.

A foreign investor that has filed may not make the investment until 30 days have passed from the date of acceptance (FEFTA, Article 27(2)). If the authorities find that screening is not needed, the period is shortened (proviso to Article 27(2)). For shortened filings, the date from which the investment may be made is posted on the Bank of Japan website.

Conversely, if screening from a national security standpoint is considered necessary, the period may be extended to four months from acceptance (Article 27(3)). If the Council on Customs, Tariff, Foreign Exchange and Other Transactions indicates that it cannot give its opinion within four months, the period becomes five months (Article 27(6)). After screening, the authorities may recommend or order a change to, or the suspension of, the investment (Article 27(5) and (10)).

If an investor that was required to file invests without filing, or invests before the waiting period ends, it may become subject to corrective orders. Where the authorities find a national security concern, they may order the disposal of the acquired shares or other measures (FEFTA, Article 29(1)).

Filing is not the end of the process. According to the Bank of Japan's FEFTA Q&A, an execution report must be submitted within 45 days of acquiring the shares or completing the other notified transaction (FEFTA, Article 55-8).

The Ministry of Finance notes that filings tend to cluster before the year-end holidays, before long public holidays and before the peak season for shareholders' meetings, and asks investors to allow ample time.

Certain foreign investors may acquire shares, equity interests or voting rights without prior notification (FEFTA, Article 27-2(1)). This is known as the prior-notification exemption. It applies only to acquisitions of this kind; it does not cover consent to matters with a material effect on management (Article 26(2)(v)).

The exemption is not available to anyone for whom five years have not yet passed since serving a sentence under FEFTA, or since violating a disposition under FEFTA. Nor is it available to foreign governments, government agencies and central banks (collectively, foreign governments), to persons obliged to cooperate with a foreign government's intelligence-gathering activities, or to entities in which foreign governments hold 50% or more of the voting rights (Cabinet Order, Article 3-2(1)).

An investor using the exemption must comply with standards set by public notice of the Minister of Finance and the competent ministers (FEFTA, Article 27-2(1)). The main standards are:

• Not becoming, and not having related persons become, a director or company auditor of the target or related companies
• Not proposing to a shareholders' meeting the transfer or discontinuation of a business in a designated sector
• Not obtaining technology-related information that is managed as confidential in the designated-sector business

If the authorities find a breach, they may recommend measures to restore compliance and, if the recommendation is not followed, order them (Article 27-2(3) and (4)).

Within the designated sectors, those posing a particularly high risk to national security are specified as "core sectors" in a separate public notice. According to the Bank of Japan's FEFTA Q&A, for unlisted companies the exemption is available only for designated sectors other than core sectors. For listed companies in core sectors, general foreign investors may use it only if the holding, together with closely related persons, stays below 10%, and additional standards apply (Cabinet Order, Article 3-2(2)(iii)).

An investor that uses the exemption must file a post-investment report within 45 days of the investment. For investments in unlisted companies, the report is required regardless of the percentage acquired.

In practice, the deciding question is often whether you will appoint directors after the deal. If you plan to send board members, you cannot meet the exemption standards and should plan on prior notification. The same applies if the target is unlisted and operates in a core sector.

Even where no prior notification is required, a report may be due after the investment (FEFTA, Article 55-5(1)). Investments for which prior notification was filed are excluded from this reporting obligation (proviso to Article 55-5(1)).

According to the Bank of Japan's FEFTA Q&A, post-investment reports apply where the investor's nationality or location is Japan or a country or region in Appended Table 1, and the target does not operate in a designated sector (or the exemption was used). For share acquisitions, examples include cases where the shareholding or voting ratio, together with closely related persons, reaches 10% or more.

The report must be submitted through the Bank of Japan within 45 days of the investment (Ministerial Order, Article 6-2). A foreign company or a non-resident individual reports through an agent resident in Japan (Cabinet Order, Article 6-3(2)).

An act amending FEFTA was promulgated on 5 June 2026 and takes effect on 4 January 2027 (one part took effect on promulgation). The main changes described in the Ministry of Finance's summary are:

• Risk mitigation measures: measures to eliminate risks to national security are expressly made part of the notification. If notified measures are to be changed, a notification of change is required.
• Indirect investments: indirectly acquiring shares in a Japanese company, for example by acquiring control of a foreign corporation that holds those shares, is brought within the scope of regulation.
• Investments under foreign government influence: domestic investors acting under the control or influence of foreign governments or similar persons are deemed foreign investors and become subject to prior notification and related requirements.

When you acquire an overseas group, the indirect acquisition of its Japanese subsidiary's shares may itself require a filing. If closing will fall on or after 4 January 2027, check the requirements under the amended Act and its implementing regulations.

Ideally, the FEFTA analysis starts at the letter-of-intent stage. Whether the target's business falls within a designated or core sector should be part of the due diligence scope.

In the share purchase agreement, the expiry (or shortening) of the waiting period is normally made a condition precedent to closing. To allow for an extended review, leave room in the long-stop date as well.

For choosing how to enter Japan and the governing law of local contracts, see "Entering Japan as a Foreign Company". For how we handle acquisitions, see "M&A and Corporate", and for cross-border matters generally, "International & Cross-Border".

1. Check whether the buyer, including any Japanese acquisition vehicle, is a foreign investor, based on its shareholders and officers.
2. Identify the form of the transaction: unlisted shares, listed shares, a business transfer, or consent to director appointments.
3. Find out what the target and its subsidiaries actually do, and check the public notices for designated and core sectors.
4. Confirm whether the investor's country or region is in Appended Table 1.
5. Decide whether the deal requires prior notification, can use the exemption or needs only a post-investment report, and appoint a Japan-resident agent.
6. Set the signing, closing and long-stop dates with the 30-day waiting period and a possible extension in mind.
7. Add the 45-day deadline for execution or post-investment reports to your post-closing checklist.

• You cannot tell whether the target's business falls within a designated or core sector.
• You plan to appoint directors or reorganize the business after the deal.
• The buyer's shareholders include a foreign government or a government-affiliated investor.
• You have discovered that shares were acquired without a required filing.
• Closing will fall on or after 4 January 2027 and you need to know how the amended rules apply.

We advise on M&A and investments between Japan and other countries in English and Japanese. Please reach us through our contact page.

There is no 1% threshold for unlisted companies; acquiring even one share is inward direct investment (FEFTA, Article 26(2)(i)). If the target operates in a designated sector, prior notification is generally required. For designated sectors other than core sectors, the exemption may be available, but a post-investment report is still required.

Not until 30 days have passed from the date of acceptance (FEFTA, Article 27(2)). The period is shortened if the authorities find that screening is not needed. If screening is needed, it may be extended to four months, or in some cases five (Article 27(3) and (6)).

No. A Japanese company in which foreign companies or non-residents hold 50% or more of the voting rights is itself a foreign investor (FEFTA, Article 26(1)(iii)). The same analysis applies if your Japanese subsidiary is the buyer.

No. Foreign governments, entities they control and investors for whom five years have not passed since a FEFTA sentence or violation, among others, are excluded (Cabinet Order, Article 3-2(1)). Investors who can use it must comply with standards such as not becoming directors and not obtaining non-public technology information, and it is not available for unlisted companies in core sectors.

If the authorities find a national security concern, they may order the disposal of the shares or other measures (FEFTA, Article 29(1)). The Ministry of Finance asks foreign investors who discover a missed filing to promptly prepare a case questionnaire and contact the Ministry. Establish the facts and decide on your response as early as possible.