Japan’s new investment rules risk scaring off foreign investors

“BUY MY ABENOMICS!”, Shinzo Abe, Japan’s prime minister, pleaded to the New York Stock Exchange in 2013. As he lowered the drawbridge to foreign investors, that pitch seemed to work. Today overseas owners hold 30% of Japan’s TOPIX index of stocks and account for about 70% of the daily turnover on the Tokyo Stock Exchange (TSE). But new rules threaten to reverse these trends. 

A proposed change to the Foreign Exchange and Foreign Trade Act, unveiled on October 8th, will lower the minimum stake foreigners can buy in many listed Japanese companies without prior government approval, from 10% to 1%. Other changes include requiring foreign directors to seek official permission before they sit on the boards of Japanese firms. 

The finance ministry says it wants to protect sensitive sectors such as energy and weapons manufacturing. But analysts warned that the rules could choke off investment. Akira Kiyota, the head of the TSE told the Financial Times they were “absolutely idiotic”. Under fire, the finance ministry clarified on October 18th that foreign “portfolio investors” (such as banks, insurance firms and asset managers) would not need to seek prior approval, as long as they could prove they had no intention “to influence management”. The tweaked legislation was approved by the cabinet and...



via The Economist: Finance and economics Business Feeds

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