SAKURA Law Office | Legal Update by Managing Partner Kenshiro Michishita
September 24, 2026
SAKURA Law Office | Kenshiro Michishita, Managing Partner
SAKURA Law Office has published the eleventh installment of its Legal Update series by Managing Partner Kenshiro Michishita: “Japan’s 2027 FEFTA Reform and Foreign Investment Screening — Implications for Foreign Investors, Private Equity and M&A in Japan.”
Foreign investment plays an important role in the Japanese economy by bringing capital, technology, talent and access to international markets. At the same time, investment into businesses involving semiconductors, artificial intelligence, cybersecurity, telecommunications, energy, defense, space, critical infrastructure and other sensitive areas increasingly raises questions of economic security, including the protection of important technologies, confidential information and continuity of essential services.
Against this background, the Act Partially Amending the Foreign Exchange and Foreign Trade Act was enacted on May 29, 2026 and promulgated on June 5, 2026. On September 16, 2026, the Japanese Ministry of Finance announced the related Cabinet Orders, Ministerial Ordinances and Public Notices. The Government has stated that the relevant implementing measures are scheduled to take effect on January 4, 2027, with full application from February 3, 2027.
The reform is not merely an expansion of the list of business sectors subject to prior notification. It materially reshapes Japan’s foreign investment review framework by giving clearer legal status to risk-mitigation measures, extending review to certain indirect acquisitions of Japanese shareholdings through overseas transactions, addressing investments influenced or controlled by foreign governments and other high-risk actors, creating a post-investment intervention mechanism for certain investments outside the traditional designated-sector framework, refining the treatment of companies holding important technologies, and strengthening inter-agency review.
For foreign strategic investors, private equity sponsors, venture capital funds, sovereign-linked investors, family offices and other investors, FEFTA analysis should no longer be treated as a closing-stage formality. Investor status, ultimate ownership and control, target business lines and technologies, equity and voting percentages, board nomination rights, access to non-public information, and post-closing governance should be examined from the outset of the transaction.
This Legal Update explains the principal features of the 2027 framework based on the amended Act, the implementing measures and Ministry of Finance materials available as of September 24, 2026, and addresses how foreign investors and Japanese targets should integrate FEFTA review into transaction structuring, due diligence, acquisition agreements, closing conditions and post-merger integration.
Executive Summary
The 2027 FEFTA reform moves Japan’s foreign investment screening regime further away from a purely formal analysis focused on whether a foreign investor directly acquires shares in a Japanese company operating in a designated business sector. The amended framework gives greater weight to substantive control, the investor’s characteristics, access to important technology and information, indirect acquisitions, and national-security risks that may emerge after closing.
One of the most significant changes for cross-border M&A is the addition of certain indirect acquisitions to the prior-notification regime. A transaction completed entirely outside Japan may become relevant under FEFTA where the acquired foreign group holds an interest in a Japanese company. Ministry of Finance materials contemplate different thresholds depending on the characteristics of the investor, including certain cases involving indirect holdings of 1% or more for foreign investors that are considered particularly high-risk and are not eligible for the prior-notification exemption scheme, and certain 50% or greater indirect holdings for investors eligible to use the exemption scheme.
The reform also broadens the circumstances in which a Japanese entity or resident may be treated as a foreign investor where investment activity is conducted under the control, direction or influence of a foreign government or other relevant foreign person. Formal incorporation in Japan will therefore not necessarily end the inquiry; transaction parties may need to review substantive ownership, governance, instruction rights and other relationships.
In addition, certain investments that were not traditionally subject to prior notification may become subject to post-investment information requests and, in serious cases, risk-mitigation or divestment measures for up to five years after completion. The effect is that a conclusion that a target falls outside a designated business sector will no longer necessarily end FEFTA risk analysis in all cases.
For M&A practice, the principal lesson is straightforward: FEFTA should be assessed at the structuring and term-sheet stage, not immediately before closing. The analysis should then be carried through due diligence, regulatory-condition drafting, risk allocation in the SPA, long-stop-date planning, information-access protocols, board and governance rights, and post-closing integration.
1. What Is Japan’s Foreign Investment Screening Regime under FEFTA?
Japan’s Foreign Exchange and Foreign Trade Act, commonly referred to as FEFTA, is based on the principle that external economic transactions are generally free while permitting regulatory review where necessary from the perspective of national security, public order, public safety and the sound operation of the Japanese economy.
Under the current framework, a foreign investor may be required to file a prior notification when carrying out certain forms of inward direct investment involving a Japanese company that conducts business in a designated business sector. Depending on the circumstances, regulated conduct may include the acquisition of shares or equity interests, consent to the appointment of the foreign investor or a related person as a director or statutory auditor, and consent to proposals concerning the transfer or discontinuation of businesses falling within designated sectors.
FEFTA is not a general prohibition on foreign investment. The Ministry of Finance has repeatedly emphasized that the purpose of the regime is to continue promoting sound inward investment that contributes to Japan’s economic development while ensuring that investments presenting risks to national security and related interests are appropriately reviewed. In practice, FEFTA therefore operates as a risk-based foreign investment screening regime rather than an anti-investment regime.
2. Why the 2026 Reform Matters — Review Is Moving from Formal Sector Analysis toward Control, Technology and Information
The 2026 reform reflects both the experience accumulated since Japan’s earlier foreign-investment reforms and rapid changes in the economic-security environment. Traditional screening has relied heavily on whether the target operates in designated areas such as defense, nuclear energy, aviation, telecommunications and infrastructure. That approach remains important, but business-sector classification alone no longer captures all national-security concerns.
A software company, for example, may hold strategically significant algorithms, encryption technology, artificial-intelligence technology, sensitive datasets or technical know-how even if its formal industry classification does not immediately suggest a traditional security-sensitive sector. Likewise, control of a Japanese company may change through the acquisition of an overseas holding company without any direct acquisition of Japanese shares at the top transaction level.
The amended framework should therefore be understood as an effort to capture the economic substance of investment: who ultimately controls or influences the investor, what technology and information the target holds, how control may change through indirect ownership, what access rights the investor will obtain, and what security risks may arise after closing.
3. Timing — January 4, 2027 Effective Date and Full Application from February 3, 2027
On September 16, 2026, the Ministry of Finance announced the implementing Cabinet Orders, Ministerial Ordinances and Public Notices relating to the amended FEFTA framework. The Government has stated that the measures are scheduled to take effect on January 4, 2027 and to be fully applied from February 3, 2027.
Transactions expected to sign or close around the end of 2026 and the beginning of 2027 require particular care. The applicable rules may depend not simply on the signing date of the SPA but on the timing of the regulated act, such as the acquisition of shares or voting rights, appointment of directors, or other conduct within the statutory definition of inward direct investment.
For transitional transactions, parties should review FEFTA provisions in the SPA, closing conditions, regulatory covenants and long-stop dates with the new framework in mind.
4. Risk-Mitigation Measures Become More Explicitly Embedded in the Statutory Framework
Foreign investment review does not always result in a binary approval-or-prohibition outcome. In practice, an investment may proceed subject to commitments designed to address national-security concerns. These commitments are commonly described as risk-mitigation measures.
Examples identified by the Ministry of Finance include commitments not to exercise shareholder rights under the influence of a foreign government and restrictions on access to confidential information of the investee company. Depending on the case, measures may affect governance, information rights, board participation, access to technical systems, voting arrangements or other post-closing conduct.
The amended framework places risk-mitigation measures on a clearer statutory footing and strengthens procedures where measures disclosed at the notification stage are not implemented or are later proposed to be modified. Recommendations or orders may be issued in appropriate circumstances, and serious non-compliance can lead to orders concerning disposal of shares or other remedial action.
For transaction counsel, these measures should not be treated as side arrangements disconnected from the acquisition agreement. If the investor accepts information barriers, restrictions on board involvement, limitations on voting or similar measures, those obligations should be reflected in the SPA, shareholders’ agreement, information-security arrangements, board procedures and post-merger integration plan.
5. Indirect Acquisitions — Overseas M&A Can Trigger a Japan FEFTA Filing
A particularly important reform for global M&A is the extension of the prior-notification regime to certain indirect acquisitions. Historically, the central case involved a foreign investor directly acquiring shares in a Japanese company operating in a designated business sector. Yet a change of control could also occur where another foreign investor acquires, outside Japan, a foreign company that itself holds shares in the Japanese company.
The amended regime addresses that gap. Ministry of Finance materials contemplate prior-notification requirements for specified indirect acquisition structures, including cases where an indirect acquirer newly obtains 50% or more of the voting rights of an entity directly holding the Japanese interest, or where related persons of the indirect acquirer newly constitute a majority of the officers of the direct holding entity or its parent.
The contemplated thresholds also differ according to investor characteristics. For foreign investors considered particularly high-risk and not eligible for the prior-notification exemption scheme, certain indirect acquisitions resulting in an indirect holding of 1% or more of the Japanese company may fall within the new regime. For foreign investors eligible to use the exemption scheme, the implementing framework limits the relevant indirect-acquisition category to certain cases resulting in holdings of 50% or more.
The practical consequence is significant. Even where the transaction agreement is between non-Japanese parties and the direct target is incorporated outside Japan, counsel should identify any Japan nexus early if the acquired group holds shares or equity interests in a Japanese company. From 2027 onward, the statement that ‘we are not directly buying a Japanese company’ will not, by itself, be a sufficient FEFTA analysis.
6. What This Means for Global Private Equity and Strategic M&A
Private equity sponsors and multinational strategic buyers routinely acquire groups with subsidiaries and portfolio investments across multiple jurisdictions. Following the 2027 reforms, the buyer should determine not only whether the global target owns a Japanese subsidiary, but also whether any foreign group entity holds a material interest in a Japanese company, what business that Japanese company conducts, what technology it holds, and what governance or information rights will change upon closing.
The investor-side analysis should then be combined with an assessment of the purchaser’s own status, ultimate ownership, governmental links, eligibility for any exemption scheme, and the governance rights that will exist after closing.
In transactions already requiring multi-jurisdictional merger control, foreign investment review and export-control analysis, Japanese FEFTA should be added to the global regulatory-approvals workstream at an early stage rather than addressed as a Japan-specific closing checklist item.
7. Japanese Investors May Be Deemed Foreign Investors Where Foreign Government Control or Influence Exists
FEFTA already treats certain Japanese entities as foreign investors where, for example, non-residents hold a majority of voting rights or occupy a majority of certain management positions, and the current law also captures specified investment activity carried out for the account of a foreign investor.
The 2026 amendment expands the analysis. Under specified conditions, a Japanese entity or resident may be deemed a foreign investor where it invests under instructions arising from contractual arrangements, foreign law or other relationships, or where particular relationships — including family, employment or obligations connected with foreign governmental information-gathering activities — indicate that investment is being carried out for the benefit of a foreign person considered particularly high-risk.
This means that the place of incorporation of an acquisition vehicle is not determinative. In fund structures, co-investments, special-purpose vehicles and family-office arrangements, the analysis may need to extend to sponsors, LPs, investment committees, side letters, instruction rights and information-sharing obligations.
8. A New Post-Investment Intervention Mechanism for Certain Non-Designated-Sector Investments
Under the traditional framework, investments in businesses outside designated sectors generally presented a more limited foreign-investment review risk. The amended framework changes that position for certain investor categories.
According to Ministry of Finance materials, where an inward investment is not otherwise subject to prior notification, the investor is within a category considered particularly high-risk, and the investor acquires 10% or more of the shares or voting rights in certain circumstances, the authorities may request information during a period of up to five years after the investment where changes in the international environment or other circumstances indicate a substantial national-security concern.
If serious concerns are identified, risk-mitigation measures, divestment recommendations or orders may become relevant, and the framework also contemplates certain direct orders in cases of exceptional urgency.
The practical point is that concluding at signing that a target is outside a designated business sector will not necessarily eliminate all FEFTA exposure. For investors in higher-risk categories, post-closing monitoring, changes in the target’s business, acquisition of important technology and information-access arrangements may continue to matter.
9. Important Technology Becomes a More Direct Screening Factor
Historically, target-sector classification has played a central role in determining whether prior notification is required. In an environment of rapid technological change, however, an industry label may not reliably identify all technology relevant to national security.
The 2027 implementing framework therefore supplements sector-based screening with mechanisms that place greater emphasis on possession of important technologies. Ministry of Finance materials refer to the relationship with technology categories already subject to security-oriented management under FEFTA, including specified technologies and technologies designated for particularly careful management.
This materially affects M&A due diligence. Counsel should not stop at the target’s articles of incorporation, registered business purposes, revenue breakdown or industry code. The review may need to examine actual R&D activity, source code, algorithms, engineering information, manufacturing know-how, technical documentation and other technology assets. FEFTA diligence will increasingly intersect with commercial, IP and technical due diligence.
10. Sector Refinement — Targeted Risk Review Rather Than Indiscriminate Expansion
The reform should not be understood as a uniform expansion of regulation. The Ministry of Finance has also pursued rationalization of the designated-sector framework, including refinement of information-and-communications-related sectors where filing volumes had increased significantly, with the objective of concentrating review resources on areas presenting genuine cybersecurity or national-security concerns.
At the same time, the regime is becoming more targeted toward important technology, critical goods and services, and important information. The direction of policy is therefore increasingly risk-based: reduce unnecessary screening where risk is low, but scrutinize investments presenting meaningful security concerns more closely.
Parties should reassess sector classification and technology status under the 2027 implementing measures rather than relying mechanically on a filing analysis performed in a prior transaction.
11. The Japan Foreign Investment Committee — A More Coordinated Inter-Agency Review Structure
On June 29, 2026, the Government established the Japan Foreign Investment Committee, or JFIC. The committee is co-chaired by the Ministry of Finance and the National Security Secretariat, with participation from ministries including the Ministry of Foreign Affairs, the Ministry of Economy, Trade and Industry and the Ministry of Defense, together with relevant sectoral ministries.
The amended statute also formalizes mechanisms under which the Minister of Finance and competent ministers may seek views from other administrative authorities where necessary for national-security and related review of inward investment.
For investors, this means that the authorities may examine not only the target’s formal business but also its position in supply chains, technology assets, data, government procurement relationships, defense or economic-security significance and other relevant factors. The quality and consistency of transaction explanations may therefore matter more than ever; notification should not be approached as a purely formal filing exercise.
12. Who Is a Foreign Investor? Nationality Alone Does Not Answer the Question
The FEFTA concept of a foreign investor is not determined simply by the nationality of the deal professional or fund manager. Non-residents, entities organized under foreign law and certain Japanese entities with specified foreign ownership or management characteristics may fall within the definition. The 2027 framework adds further deeming provisions for certain domestic actors subject to relevant foreign-government or foreign-person control or influence.
In a private equity structure, the analysis may require consideration not only of the GP but also the place of formation of the investment vehicle, voting arrangements, LP composition, participation by sovereign or government-linked investors, sponsor relationships and investment-committee governance. For strategic buyers, the ultimate parent, state ownership and other control relationships may be relevant.
A robust FEFTA analysis therefore combines buyer-side ownership and control analysis with target-side business-sector and technology analysis.
13. The Prior-Notification Exemption Scheme Is Not a Blanket Exemption
FEFTA provides an exemption framework under which qualifying foreign investors may, subject to specified conditions, avoid prior notification for certain investments in designated sectors. The exemption is not available to every investor and does not eliminate all compliance obligations.
An investor using the exemption must satisfy and continue to observe the applicable exemption criteria. Depending on the circumstances, those criteria may relate to involvement in management, access to non-public technical information and proposals concerning transfer or discontinuation of relevant businesses.
The 2027 indirect-acquisition framework itself distinguishes between foreign investors that cannot use the exemption scheme and those that can, with different filing thresholds. Accordingly, statements such as ‘we are an institutional investor’ or ‘we are acquiring only a minority stake’ are not substitutes for a transaction-specific analysis.
14. FEFTA Due Diligence — What Buyers and Sellers Should Review
A cross-border FEFTA due-diligence review should begin with the business activities of the target and its subsidiaries and assess whether any activity falls within a designated sector or involves technology that may become relevant under the new framework. Even a business line representing a small proportion of group revenue can affect filing analysis.
Counsel should then review historical foreign-investor share acquisitions, director appointments, business transfers and similar matters to determine whether any required prior notifications or post-closing reports were properly made. A historical filing omission discovered after acquisition can affect regulatory engagement, transaction timing and post-closing compliance planning.
The review should also cover important technology and confidential information, existing access rights granted to foreign investors, historical risk-mitigation commitments, communications with authorities, group reorganizations, licensing arrangements and overseas subsidiaries. On the sell side, conducting a FEFTA self-review before launching a process can materially improve deal certainty and reduce late-stage surprises.
15. Drafting the SPA — FEFTA Approval Is Not Merely a Filing Obligation
Where prior notification is required, the acquisition agreement should allocate responsibility for regulatory engagement. The SPA should address who prepares and submits the filing, what information the other party must provide, how responses to questions or supplemental information requests will be coordinated, and to what extent the parties will consult regarding meetings or communications with the authorities.
Risk allocation becomes especially important if the authorities request mitigation measures. The parties should determine whether the buyer must accept restrictions on information access, voting, board involvement or business operations and, if so, within what limits. Whether a hell-or-high-water commitment is appropriate, or whether materiality thresholds and termination rights should apply, will depend on the competitive dynamics of the transaction and the purchaser’s risk appetite.
Closing conditions should also be drafted carefully. It may not be sufficient to require merely that a filing has been submitted. The condition may need to address expiration of the statutory waiting period, absence of any order preventing closing, and whether any required mitigation package is acceptable under the agreed contractual standard.
16. Why FEFTA Should Be Addressed at LOI and Bid Stage
Foreign-investment review is not an issue that should first reach the legal team after the SPA has been negotiated. In a competitive process, FEFTA risk can affect transaction certainty, timing, valuation and the seller’s choice of bidder.
Where the purchaser may fall within a higher-risk investor category, the target holds sensitive technology, or material post-closing restrictions may be imposed, those issues can influence the seller’s assessment of execution risk. Conversely, an investor that has already analyzed FEFTA, developed a filing strategy and prepared a credible regulatory timetable may be able to demonstrate superior transaction certainty.
For this reason, FEFTA should be considered at the LOI, non-binding offer and binding-offer stages and incorporated into the overall regulatory timetable where relevant.
17. Minority and Venture-Capital Investments Are Not Automatically Outside FEFTA
FEFTA is not limited to 100% acquisitions or changes of control. Minority investments may be regulated, including specified share acquisitions in listed companies, acquisitions of shares in private companies and consent to certain director appointments.
This is particularly relevant to overseas VC and CVC investments into Japanese startups operating in AI, semiconductors, cybersecurity, quantum technology, space, telecommunications and other sensitive technology areas. A small investment percentage does not by itself eliminate the need for analysis.
Information rights, board observer rights, director nomination rights and consent rights in investment agreements can also matter when considering the availability of exemption treatment and the overall regulatory risk. Economic terms and governance rights should therefore be reviewed together.
18. Historical Filing Failures — Do Not Ignore a Potential Breach
Failure to make a required FEFTA prior notification can expose a foreign investor to criminal penalties and, depending on the circumstances, orders relating to sale of shares or other remedial measures. Violations of exemption criteria can also result in recommendations, orders and other enforcement measures.
The Ministry of Finance publishes procedures for situations in which an unfiled transaction or other non-compliance is identified, including prompt submission of an incident information form together with omitted filings or reports. In describing its enforcement approach, the Ministry has indicated that it considers matters such as whether the breach was intentional, whether the investor voluntarily self-reported, the speed of disclosure after discovery, concealment and recurrence.
Accordingly, if historical FEFTA issues are identified through M&A diligence or a post-closing compliance review, the parties should first determine whether a filing obligation actually existed under the law applicable at the relevant time, then develop an appropriate remediation and authority-engagement strategy rather than leaving the matter unresolved.
19. The Japanese Target and Seller Are Also Central to FEFTA Execution
Even where the formal filing obligation falls on the foreign investor, the Japanese target is not merely a passive party. The investor cannot assess the filing requirement without accurate information concerning the target’s businesses, technology and historical regulatory status.
As the 2027 framework gives greater weight to important technology, a target that has not mapped its own technology and sensitive information may be unable to answer regulatory questions efficiently at the beginning of a transaction. If mitigation measures impose information-access restrictions or governance conditions, the target may also need to modify systems, internal policies and board procedures after closing.
Japanese companies contemplating a sale should therefore consider a pre-sale FEFTA self-diligence exercise covering designated sectors, important technologies, historical filings, foreign shareholdings and existing mitigation commitments.
20. FEFTA Does Not End at Closing — Post-Merger Integration and Ongoing Compliance
FEFTA obligations may continue after closing. Risk-mitigation measures accepted during review must be implemented on an ongoing basis. The amended framework also introduces procedures relevant to modifications of such measures and new post-investment intervention mechanisms for certain investments.
Post-merger integration should therefore operationalize mitigation commitments across the functions responsible for implementing them, including legal, IT, information security, corporate planning and the board secretariat. Changes in directors, information-access permissions, business reorganizations or technology transfers should be screened for potential FEFTA implications.
Foreign-investment compliance should be integrated with post-closing governance rather than stored as a regulatory memo that is forgotten after completion.
21. Our Perspective — The Core of FEFTA Compliance after the 2027 Reform
The most important practical point under the 2027 framework is that FEFTA analysis should no longer be reduced to a mechanical matrix of target sector and acquisition percentage. The amended system increasingly examines the substance of the investor, foreign-government influence, indirect acquisitions, important technology, mitigation commitments and security risks arising after investment.
Cross-border M&A therefore requires integrated consideration of corporate law, acquisition agreements, merger control, export controls, economic security, intellectual property and information governance. FEFTA should be embedded into structuring, due diligence, contract negotiations and post-closing governance rather than treated as a separate filing exercise at the end of the process.
SAKURA Law Office and Managing Partner Kenshiro Michishita advise on cross-border M&A, corporate law, international transactions, AI and technology, data protection, Web3 and financial regulation. In foreign-investment matters, we consider not only the preparation of FEFTA filings but also transaction feasibility, regulatory strategy, information governance, mitigation structures and acquisition agreement terms.
22. Frequently Asked Questions
Q1. Does every acquisition of a Japanese company by a foreign company require a FEFTA prior notification?
No. The answer depends on the investor’s status, the target’s business activities and technologies, the form and percentage of the investment, and whether an exemption is available. Private-company share acquisitions and investments in companies operating in designated sectors frequently require careful analysis, so the issue should be reviewed early in the transaction.
Q2. Can FEFTA apply to an M&A transaction between two non-Japanese companies?
Yes. Under the 2027 reforms, certain indirect acquisitions may be subject to prior notification where an overseas transaction results in the acquisition of an interest in a Japanese company. If the acquired group holds a Japanese investment, a Japan-nexus review is required even where the principal transaction is offshore.
Q3. If the Japanese target does not operate in a designated business sector, is there no FEFTA risk?
Not necessarily. The new framework places greater emphasis on possession of important technology and introduces post-investment intervention mechanisms for certain investments by particularly high-risk investors even outside the traditional designated-sector framework.
Q4. If the buyer is a Japanese corporation, can it still be treated as a foreign investor?
Yes. Certain Japanese entities already fall within the FEFTA definition based on foreign ownership or management, and the amended regime adds further deeming rules where specified domestic investors act under relevant foreign-government or foreign-person control or influence. Substantive control and instruction relationships therefore matter.
Q5. What should an overseas private equity fund review?
Depending on the structure, the analysis may extend beyond the acquisition vehicle to the GP, sponsor, ultimate owners, LP composition, participation by sovereign or government-linked investors, investment committee and instruction rights. Target-sector, technology, acquisition percentage, board rights and information rights must also be examined.
Q6. If an investor qualifies for the prior-notification exemption scheme, is FEFTA no longer relevant?
No. The investor must satisfy the eligibility requirements and comply with the applicable exemption criteria, and certain post-closing reports or conduct restrictions may still apply. An exemption from prior notification does not mean that FEFTA ceases to apply.
Q7. What FEFTA provisions should be included in an SPA?
The agreement should address responsibility for filings and authority engagement, information-sharing obligations, coordination of regulatory responses, closing conditions, the long-stop date, the extent to which the buyer must accept mitigation measures, and termination rights if unacceptable restrictions are imposed.
Q8. What should parties do if due diligence identifies a historical failure to file?
First determine whether a filing obligation actually existed under the law applicable at the time. If there was a failure to file, the Ministry of Finance has published procedures for voluntary contact and remediation. The facts, investor status, target business, timing, reasons for the omission and proposed corrective measures should be organized before approaching the authorities.
23. About Kenshiro Michishita’s Legal Update Series
SAKURA Law Office publishes the Legal Update series through the profile of Managing Partner Kenshiro Michishita, addressing important legal issues affecting companies, investors and executives in areas including corporate law, M&A, cross-border transactions, AI and technology, data protection, intellectual property, crisis management, employment, whistleblowing, Web3 and digital assets.
The series is designed not merely to summarize statutes but to explain how legal developments affect transaction structures, contracts, due diligence, information governance, boards of directors, internal policies, closing mechanics and executive decision-making.
This eleventh installment addresses Japan’s 2027 FEFTA reform and foreign investment screening. Future Legal Updates will continue to address cross-border M&A, doing business in Japan, international disputes, enforcement of foreign judgments, arbitration, reputation and defamation, corporate investigations, Web3 and other issues relevant to companies investing in or operating with Japan.
24. How SAKURA Law Office Can Assist with FEFTA, Foreign Investment and Cross-Border M&A
SAKURA Law Office advises foreign investors, private equity sponsors, venture capital funds, strategic buyers and other investors on acquisitions, minority investments, joint ventures and other investments in Japanese companies, including analysis of foreign-investor status, prior-notification and post-closing reporting requirements, designated sectors and important technologies, exemption eligibility, indirect acquisitions, foreign-government control or influence, risk-mitigation measures and authority engagement.
We also advise Japanese sellers and targets on pre-sale FEFTA self-diligence, bidder regulatory-risk assessment, data-room preparation, FEFTA provisions in SPAs and shareholders’ agreements, closing conditions, mitigation measures and post-closing compliance. For global M&A transactions, we can assess FEFTA issues where a foreign target group holds Japanese subsidiaries or investments and coordinate the Japan analysis with the broader transaction timetable.
Transactions involving complex fund ownership, sovereign or government-linked investors, or Japanese targets with AI, semiconductor, cybersecurity, telecommunications or other sensitive technologies should be assessed on the basis of the complete ownership and governance structure rather than isolated filing thresholds.
25. Contact
For advice on Japan’s amended FEFTA, foreign investment screening, cross-border M&A, FEFTA due diligence, prior notification, post-closing reporting, exemption schemes, indirect acquisitions, risk-mitigation measures and related international corporate-law matters, please contact SAKURA Law Office.
When contacting us, please indicate that your inquiry concerns ‘FEFTA / foreign investment / cross-border M&A’ so that it can be directed promptly to the appropriate lawyer.
SAKURA Law Office
Kenshiro Michishita, Managing Partner
Ark Hills South Tower 4F, 1-4-5 Roppongi, Minato-ku, Tokyo 106-0032, Japan
Tel: +81-3-6910-0692
Written and supervised by
SAKURA Law Office
Kenshiro Michishita, Managing Partner
Principal References
Ministry of Finance, 2027 FEFTA Reform materials
Ministry of Finance, materials on enhancement of Japan’s inward direct investment screening system
Ministry of Finance, overview of the inward direct investment screening regime under FEFTA
This article provides general legal information based on FEFTA, the 2026 amending legislation, implementing Cabinet Orders, Ministerial Ordinances, Public Notices, Ministry of Finance materials and other publicly available sources as of September 24, 2026. It does not constitute legal advice or a legal conclusion regarding any specific transaction. Filing and reporting requirements depend on the investor’s status and control relationships, the target’s businesses and technologies, investment percentage, transaction structure, availability of exemptions, board nomination and information-access rights, and other facts. Additional guidance and implementation materials may be published or updated before full application of the 2027 framework. Specific transactions should be assessed under the laws and official materials in effect at the relevant time.