Japan Tightens Foreign Investment Rules for Semiconductors

On Friday, Japan announced new regulations for foreign investors in the semiconductor manufacturing equipment sector, as part of its efforts to stabilize supply chains in this critical industry.

According to a statement from the Japanese Ministry of Finance reported by Bloomberg, foreign investors will now be required to provide advance notice before making direct investments in semiconductor manufacturing equipment.

This includes acquiring a stake of 1% or more in publicly listed companies or purchasing shares in private firms.

The ministry clarified that these measures aim to address risks associated with technology leakage and prevent the use of commercial technologies for military purposes.

The new regulations will also include advanced electronic components, marine equipment, synthetic fiber cables, and multi-use machinery on the list of “key business sectors.”

A finance ministry official told Bloomberg that these steps are intended to bolster national security while having a limited impact on companies.

This move comes as Japan seeks to revitalize its semiconductor manufacturing capabilities, a cornerstone of its economic security strategy.

Over the past three years, Japan has allocated 4 trillion yen (approximately $26.9 billion) to enhance the semiconductor sector and support digitalization efforts.

In the markets, Japan's Nikkei index surged nearly 3% on Friday, achieving its best weekly performance in over four years.

This rise followed strong US retail sales data, which alleviated recession concerns in the world's largest economy and Japan's largest trading partner.

The Nikkei rose 3.6% to close at 38,062.67 points, marking its second-largest daily gain of the year.

The broader Topix index also increased by approximately 3% to 2,678.60 points. The Nikkei recorded its largest weekly gain since April 2020, climbing over 8% due to easing fears about the U.S. economy, a slowdown in yen appreciation, and a rebound in Japan's economic growth.

Major indices on Wall Street also closed higher on Thursday, following a 1% increase in U.S. retail sales in July after a 0.2% decline in June.

The Nikkei index saw broad-based gains, with 219 out of 225 listed stocks advancing, while only 5 declined. Shares of several major companies rose significantly, with Fast Retailing up 6.2%, Tokyo Electron, a semiconductor equipment manufacturer, gaining 4.8%, and Advantest increasing by 6.8%.

Meanwhile, the yen fell against the dollar, supporting export-oriented stocks such as Toyota Motor Corporation, which rose by 2%.

The Nikkei had dropped more than 12% on August 5, its largest daily decline since “Black Monday,” amid concerns about a US recession following weak employment data. However, the index has since recovered, though it remains below its all-time high of 42,426.77 points reached in mid-July.

Among individual stocks, Fujikura, a manufacturer of electrical components, saw its shares rise by more than 11%, becoming the largest percentage gainer.