What jurisdictional thresholds trigger a review or application of the law? Is filing mandatory?
As explained in question 1, the Forex Act imposes prior notification requirements on investments into certain limited areas of businesses and investments involving certain geographical regions.
As long as the intended investment falls into one of these categories, the filing is mandatory and there are no numerical thresholds such as turnovers, asset size or investment amounts for exemptions. Even in cases where the business triggering the prior notification is relatively small as to the size of the overall business, the filing could be triggered. For instance, if a part of a battery being sold by an electric manufacturer happened to be used in satellites, then the prior notification could be required. As a waiting period of prior notification (see question 11) could delay the whole process, careful review of the targeted business is highly recommended, especially when a targeted company conducts a wide range of business activity such as electrical manufacturers.National interest clearance
What is the procedure for obtaining national interest clearance of transactions and other investments? Are there any filing fees? Is filing mandatory?
An application must be submitted to the Minister of Finance and the minister with jurisdiction over the targeted businesses via the Bank of Japan. Forms for application are available at the website of the Bank of Japan. There are no filing fees.
An application of the prior notification will be reviewed by the relevant ministers. The authority may require hearings, written responses for its inquiries and submission of additional documents.
If the investment does not fall into the categories requiring the mandatory filings explained in question 1, the authorities do not have power to intervene in such investments.
Which party is responsible for securing approval?
An investor is responsible for securing approval. Therefore, if the investment falls into the category triggering the prior notification, it is strongly recommended in practice to make a filing of an application for the prior notification to the relevant authorities and a lapse of the relevant waiting period (see question 11) as conditions precedent to the consummation of the investment.Review process
How long does the review process take? What factors determine the timelines for clearance? Are there any exemptions, or any expedited or ‘fast-track’ options?
Under the Forex Act, if prior notification is required for an investment, a person is required to wait to close the investment for a period of 30 days after the acceptance of the application by the Bank of Japan. However, such a waiting period will be normally shortened to two weeks from the acceptance in accordance with the relevant ordinance. According to the Ministry of Finance, more than 95 per cent of applications have been so shortened. Moreover, with an aim to facilitate more inward investment in Japan, the Ministry of Finance and other relevant ministries have implemented expedited fast-track options for greenfield investment (ie, certain investments involving a wholly owned Japanese subsidiary), rollover investments (ie, certain investments, the same type of which were previously filed within six months by the same investor) and passive investments (ie, certain investments that the investor undertook so as not to proactively participate in the management or to take control of the company). If the fast-track option is applied, the waiting period will be further reduced to five business days.
However, if the authority finds that there needs to be a review procedure on whether the investment is likely to impair the national security, impede public order or compromise public safety, the waiting period can be extended up to five months.
Must the review be completed before the parties can close the transaction? What are the penalties or other consequences if the parties implement the transaction before clearance is obtained?
As explained in question 11, an investor may not close the transaction for which prior notification is required for the relevant waiting period. If the investor closes the transaction in violation of such a time restriction, the investor will be subject to criminal penalties including imprisonment of up to three years or a fine, or both; the fine will be up to three times the amount of the investment or ¥1 million, whichever is higher.Involvement of authorities
Can formal or informal guidance from the authorities be obtained prior to a filing being made? Do the authorities expect pre-filing dialogue or meetings?
The Bank of Japan accepts general enquiries in relation to filing procedures under the Forex Act via the telephone.
The Ministry of Finance and other relevant ministries are generally open for pre-filing consultation if there are any substantive enquiries. Although such a pre-filing consultation is voluntary, it is recommended for an investor to conduct pre-filing consultations, especially if there is any ambiguity in terms of the application of relevant laws and regulations.
When are government relations, public affairs, lobbying or other specialists made use of to support the review of a transaction by the authorities? Are there any other lawful informal procedures to facilitate or expedite clearance?
As explained in question 9, applications of prior notifications will be reviewed by the Ministry of Finance and the minister with jurisdiction over the targeted businesses. As there has only ever been one case where the order for suspension of the investment was issued, the utilising of government relations, public affairs lobbying or other specialists to support the review of the transaction is uncommon. Other than cooperating fully with the review process by the authority, such as providing necessary information that is requested or promptly providing answers to the inquiries, there are no other informal procedures to facilitate or expedite clearance.
The waiting period will be expedited as a default rule set by the ordinance as described in question 11.
What post-closing or retroactive powers do the authorities have to review, challenge or unwind a transaction that was not otherwise subject to pre-merger review?
The competent authorities have the powers to issue an order requiring the foreign investor who failed to make prior notification to divest all or a part of the shares that were acquired or to take such other necessary measures, if necessary, upon seeking opinion from the Council on Customs, Tariff, Foreign Exchange and other Transactions (the Council).