Advisory to Halt Buyout under Foreign Exchange Law: Implement Measures Thoroughly to Prevent Leaks of Technology

Editorial

17:56 JST, May 8, 2026

Efforts to prevent the leakage of sensitive technologies have become increasingly critical amid the worsening security environment. The government must strengthen its review of foreign investments and prevent situations that pose a serious threat.

The government issued an advisory to MBK Partners — an investment fund with bases in Japan, China and South Korea — to cancel its planned acquisition of Maki­no Milling Machine Co., a major machine tool manufacturer.

The advisory is based on the Foreign Exchange and Foreign Trade Law, and it is the second time that such an advisory has been issued. It is the first case since the law was amended in 2017, which tightened regulations.

MBK had planned to launch a takeover bid in June at the earliest to make Makino a wholly owned subsidiary but accepted the advisory and halted the plan.

The United States and China are engaged in a fierce struggle for supremacy in advanced technologies. The line between military and civilian applications has become blurred, seeing the spread of dual-use technologies that can be utilized by both sides.

Finance Minister Satsuki Katayama explained the reason for issuing the advisory by saying, “We determined that the investment poses a risk of undermining national security.” The case can be seen as a precedent that demonstrates the critical importance of scrutinizing foreign investment from the perspective of economic security.

Makino manufactures high-precision tools capable of machining parts used in automobiles, aircraft and for other applications.

The Tokyo Chamber of Commerce and Industry has long warned that machine tools capable of highly complex machining could be used for military purposes, such as in centrifuges for uranium enrichment.

China is said to have been rapidly improving its machine tool manufacturing technology. These circumstances may also have prompted the Japanese government to issue the advisory.

This is the second time the government has invoked the foreign exchange law to issue an advisory, following a 2008 case. At that time, an advisory was issued for a British investment fund’s plan to increase its stake in the power wholesaler Electric Power Development Co., or J-Power.

Since then, however, the government had generally respected free investment due to concerns about such negative impacts as discouraging foreign investments. This time, the government decided to issue the advisory based on the recognition that the world has entered an era in which each country must strengthen its economic security measures.

When applying the law to issue such an advisory, the government is required to enhance its ability to collect and analyze information. If the advisory is merely taken as a rejection of foreign capital, it will lead to a decline in investment in Japan. It is also important to communicate externally to avoid the misunderstanding that the law is applied arbitrarily.

The government submitted a bill to a special Diet session to amend the foreign exchange law. The bill focuses on establishing a “committee on foreign investment in Japan” composed of such entities as the Finance Ministry, the Economy, Trade and Industry Ministry, and the National Security Secretariat. Further enforcement of the government’s review system on the matter is expected. 

(From The Yomiuri Shimbun, May 8, 2026)