A tourist takes photos of traditional New Year decorations in Asakusa of Tokyo, Japan, Dec. 30, 2018. (Photo: Xinhua)

Japan in October approved a bill to tighten foreign ownership regulations in industries related to national security, which is expected to take effect in the spring, media reported. Analysts say the act is a show of protectionism and will repel global investors from Japan and reduce foreign direct investment (FDI) in the country.

"Japan's revision of its foreign trade act follows the US and European policies on direct investment, and in particular prevents other countries from catching up to its technologies in key industries," Zhou Xuezhi, a research fellow at the Institute of World Economics and Politics under the Chinese Academy of Social Sciences, told the Global Times on Thursday.

"China is opening up, while the US and Japan are closing their doors," said Zhou, comparing Japan's Foreign Exchange and Foreign Trade Act with China's Foreign Investment Law, which was approved in March this year.

The Japanese Cabinet approved the Amendment Bill of the Foreign Exchange and Foreign Trade Act on October 18, 2019, which will require prior notification and screening for investment in some business sectors concerned with national security, according to the Ministry of Finance of Japan's website on October 21.

Foreign investors will have to undergo a government review before obtaining one percent stake or higher in a listed Japanese firm, a sharp drop from the current 10 percent threshold. 

"Though the amendment of the act itself has an impact, China should be wary of the rise of protectionism in Japan, which is a bad sign against the backdrop of a depressed global economy," Zhou noted.

In the World Bank's 2019 Doing Business report, China ranked higher than Japan with regard to its ease of doing business. China ranked No.31 out of 190 economies while Japan ranked No.39. And China remains one of the top 10 most-improved economies in terms of the business environment. 

The Japanese Ministry of Finance said that the bill aims to further promote FDI to encourage sound economic growth and ensure minimal FDI that could pose risks to Japan's national security while respecting the principle of free investment.

But industry watcher Shang Yanan held a different view, saying that the bill will reduce FDI in Japan while repelling global investors from the Japanese market.

"I don't think this law adjustment promotes the growth of the Japanese economy, but rather limits its growth," Shang, a Tokyo-based analyst, told the Global Times on Thursday.

According to the 2019 World Investment Report by UNCTAD, FDI flows to Japan remain low compared to other major developed nations, with FDI reaching $9.9 billion in 2018, down from $17.75 billion in 2016 and $10.4 billion in 2017.

"The amendment of the bill will have an impact on all investment companies, including Chinese ventures. It covers a wide range of industries, including aviation, nuclear power, software, telecommunications, electricity, information-processing services and the internet, which are under review by the Japanese government," said Shang.