U.S. Authorities to Scrutinize Japanese Investors for Ties to China
In the United States, the Committee on Foreign Investment (CFIUS) closely monitors foreign investments in the national economy, and recently, it has been paying increased attention to possible connections between Japanese companies seeking to invest in various U.S. industries and China.
According to the Nikkei Asian Review, applications for such deals involving Japanese companies are now subject to longer reviews by U.S. authorities. This is because U.S. authorities aim to prevent Chinese investors, operating through Japan, from gaining access to American assets. Notably, even Japanese companies with established operations in the U.S. and a good reputation in the industry are not exempt from this scrutiny.
CFIUS released a report at the end of July indicating that in 2022, Japanese investors submitted the most applications for deals related to critical sectors of the American economy. The number of applications in this category reached 16, although overall, Japanese investors ranked fourth after Singapore (46 applications), China (41 applications), and Canada (39 applications) across all industrial sectors in the U.S. Last year, approximately one-third of applications, accompanied by short-form declarations, underwent more thorough analysis by U.S. regulators. As a result, 57% of applications took longer than the statutory 45 days allocated for the initial review phase.
U.S. officials may request information from foreign investors about joint ventures with Chinese partners, assets in China, and collaborations with Chinese specialists on research and development. In Japan, control over foreign investments has also tightened since 2019. Previously, deals involving the sale of more than 10% of a Japanese company’s shares to foreign investors required special approval. However, this threshold has been lowered to 1%. Unlike Japan, U.S. authorities have the power to review the results of completed deals if they were not subject to prior scrutiny. In cases related to U.S. national security, the “reverse-scope” period can significantly extend this timeframe.
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