CHAPTER I General Provisions

(Purpose) Article 1. The purpose of this Law is to create a sound basis for foreign investment in Japan, by limiting the induction of foreign investment to that which will contribute to the self-support and sound development of the Japanese economy and to the improvement of the international balance of payments;by providing for remittances arising from foreign investment, and by providing for adequate protection for such investments.

(Principle concerning Foreign Investment) Article 2. Foreign investment shall be promitted to be as free as possible, the system of validation and filing of report pursuant to the provisions of this Law shall be relaxed and eliminated gradually as the necessity for such measures decreases.

(Definitions) Article 3. In order to make uniform the application of this Law and orders issued thereunder, the following terminology shall be defined to mean: (1) "Foreign investors" shall mean: a. "Exchange non-residents" (excluding juridical persons) as defined in Article 6, item (1) of the Foreign Exchange and Foreign Trade Control Law (Law No.228 of 1949) b. Any juridical person (corporate body, enterprise) established under foreign law, or having its seat or place of administration in foreign countries, except those designated by the Foreign Investment Commission. c. Any juridical person (corporate body, enterprise), wholly owned, directly or indirectly, by a person or persons as specified in either item a. or b. above. d. Any juridical person (corporate body, enterprise), which is in fact controlled by a person or persons as specified in either item a. or b. above. e. In addition to those as specified in any one of the items a. through d. above, a person or persons as mentioned in Article 2 paragraph 1 of the Cabinet Order concerning the Acquisition of Properties and/or Rights by Foreign Nationals (Cabinet Order No.51 of 1949). (2) "Japan," "foreign countries," national currency, "foreign currency," "exchange residents," "foreign means of payment" and "property" shall mean "Japan," "foreign countries," "national currency," "foreign currency," "exchange residents," "foreign means of payment" and "property" as defined in Article 6 paragraph 1 of the Foreign Exchange and Foreign Trade Control Law; (3) "Technological assistance contracts" shall mean contracts concerning the transfer of patent or utility model rights or technologies, license agreement thereof, assistance concerning technical and factory management, and others designated by the Foreign Investment Commission (hereinafter referred to as "technological assistance" ), the period covering the payment in return of which is in excess of one year, or in excess of one year in the aggregate as the result of renewal or renewals. 2 In case of doubt as to whether or not a juridical person (corporate body, enterprise) comes under a juridical person stipulated in item (1) c. or d. of the preceding paragraph, it shall be determined by the Foreign Investment Commission.

(Balance of Payments Statement of External Assets and Liabilities) Article 4. The Minister of Finance shall, as provided for by Cabinet Order, prepare and maintain a balance of payments statement of external assets and liabilities. 2 The Minister of Finance shall submit periodically to the Cabinet the statement prescribed in the preceding paragraph. 3 The Minister of Finance may, as provided for by Cabinet Order, request the government agencies and others concerned to submit data necessary for the drafting of the statement prescribed in paragraph 1.

(Measures to be Taken When External Liabilities become Excessive or When There is Danger of Default) Article 5. In the event that the amount of external liabilities against the amount of external assets has become excessive and as a consequence a danger exists that necessary payment to a foreign country (including payment by foreign means of payment;hereinafter the same) arising from new investment of foreign capital cannot be made, the Minister of Finance shall report to the Cabinet. 2 In the event that the report mentioned in the preceding paragraph is made, the Foreign Investment Commission or the competent Minister shall not licence, validate, approve, or take other administrative action concerning the assuming of new obligations to foreign investors, or the new payment to a foreign country arising from such new obligations, until the Cabinet has decided on the policy to be followed with regard to the said report. 3 In the event that the Cabinet has decided its policy based on the report prescribed in paragraph 1, the Foreign Investment Commission or the competent Minister shall follow such policy when licensing, validating, approving or taking other administrative action concerning the assuming of new obligations to foreign investors, or the new payment to a foreign country arising from such new obligations. 4 The provisions of the preceding two paragraphs shall not be construed to impair the rights acquired by foreign investors on the basis of license, validation, approval and/or other administrative action taken by the Foreign Investment Commission, or by the competent Minister in accordance with the provisions of this and other laws and regulations.

(Measures regarding Foreign Exchange Budget) Article 6. The Ministerial Council shall, upon consideration of the balance of payments statement prescribed in Article 4, appropriate in the foreign exchange budget the amount within which payment to a foreign country may be made of obligations assumed as the result of contracts prescribed in this Law.

(Announcement of Technological Assistance Desired) Article 7. The Foreign Investment Commission shall, in accordance with its Regulation, make public a list of the kinds of technologies concerning which technological assistance from foreign investors is desired. 2 The Foreign Investment Commission may revise from time to time the list made public in accordance with the provision of the preceding paragraph.

(Standards of Validation, License or Recommendation) Article 8. The Foreign Investment Commission or the Minister of Finance shall apply the following standards on validating or licensing contracts prescribed in this Law, and preference shall be given to those which will most speedily and effectively contribute to an improvement of the international balance of payments: (1) Directly or indirectly contributing to the improvement of the international balance of payments; (2) Directly or indirectly contributing to the development of essential industries or public enterprises; (3) Necessary for the revival or continuation of existing technological assistance contracts concerning essential industries or public enterprises. 2 The Foreign Investment Commission or the Minister of Finance shall not validate or license contracts prescribed in this Law which fall under any one of the following paragraphs: (1) Contracts the provisions of which are not fair, or are in contravention of laws and regulations; (2) Contracts which are deemed to be entered into or renewed in a manner not free from fraud, duress or undue influence; (3) When deemed to have an adverse effect on the rehabilitation of Japanese economy; (4) In the event that national currency is used in payment for the acquisition of debentures, claimable assets arising from loans, stock or proprietary interest, unless the said national currency is that which has been legally acquired from exchange of foreign means of payment for the purpose of the said acquisition, or that which has been obtained through authorized business activities in Japan, or otherwise legally obtained. 3 The provisions of the preceding two paragraphs shall apply mutatis mutandis in the event that the Foreign Jnvestment Commission recommends license, validation or approval pursuant to the provisions of this law.

Article 9. In the event that a foreign investor desires to receive payment in return for technological assistance, interest or amortization of principal of debentures or claimable assets arising from loans, by payment to a foreign country, the said effect shall be so stated in the contracts concerning technological assistance, subscription to debentures, or loans. 2 In the event that a foreign investor desires to receive payment of dividends, interest or amortization of principal of debentures, by payment to a foreign country, the said effect shall be so stated in the applications to the Foreign Investment Commission for validation of acquisition of stock, proprietary interest, or debentures from which such dividends, interert or amortization of principal arise.

CHAPTER II Filing of Report or Application for Validation of Foreign Investment

(Validation of Technological Assistance Contracts) Article 10. In the event that a foreign investor and the other party undertake to enter into or renew technological assistance contracts (such renewals shall be limited to those which extend the period of payment in the aggregate for a period in excess of one year;the same definition shall be understood hereinafter), validation from the Foreign Investment Commission shall be obtained in accordance with its Regulations.

(Validation or Filing of Report of Acquisition of Stock or Proprietary Interest) Article 11. A foreign investor desirous of acquiring stock or proprietary interest in a juridical person established under Japanese law (except in cases requiring prior report pursuant to the provisions of the following paragraph) shall obtain validation from the Foreign Investment Commission in accordance with its Regulations. 2 A foreign investor desirous of acquiring stock or proprietary interest in a juridical person established under Japanese law whose acquisition falls under any one of the following items, and who does not desire to receive dividends arising from such stock or proprietary interest by payment to a foreign country, shall file prior report with the Foreign Investment Commission in accordance with its Regulations: (1) New stock or proprietary interest allotted on the strength of legally owned stock or proprietary interest; (2) Stock or proprietary interest transferred from one foreign investor to another. 3 The provisions of the preceding paragraph shall not in any way affect restrictions pursuant to the provisions of the Foreign Exchange and Foreign Trade Control Law. 4 The provisions of paragraphs 1 and 2 shall not apply in cases where a foreign investor receives restoration of stock or proprietary interest pursuant to the provisions of the Cabinet Order concerning Restoration of United Nations'Shares (Cabinet Order No.310 of 1949), or of the Imperial Ordinance on Returning, Etc. of Allied Nationals, Property (Imperial Ordinance No.294 of 1946).

Article 12. Unless authorized as provided for by Cabinet Order, the Foreign Investment Commission shall not validate the acquisition of stock or proprietary interest pursuant to the provisions of paragraph 1 of the preceding Article unless the said acquisition meets with any one of the requirements of the following items: (1) When creating additional assets of the juridical person concerned; (2) If not creating additional assets of the juridical person concerned, when the said acquisition constitutes a part of the investment plan of the foreign investor, and is made with national currency which is legally obtained from the conversion of foreign means of payment for the said purpose.

(Validation of Acquisition of Debentures, etc.) Article 13. In the event that a foreign investor desires to acquire debentures of a juridical person established under Japanese law, or to acquire claimable assets arising from loans, and such acquisition is associated with other matters requiring validation by the Foreign Investment Commission, the said acquisition is also subject to validation by the Foreign Investment Commission in accordance with its Regulations. 2 In the event that an application for validation has been submitted pursuant to the provisions of the preceding paragraph, it shall be deemed that application to the Minister of Finance has been made pursuant to the provisions of the Foreign Exchange and Foreign Trade Control Law. 3 The Foreign Investment Commission shall not make validation pursuant to the provisions of paragraph 1 until license from the Minister of Finance has been issued with regard to the application deemed to have been submitted pursuant to the provisions of the preceding paragraph.

(Stipulation of Conditions) Article 14. The Foreign Investment Commission may, on making validation pursuant to the provisions of this Law, stipulate conditions upon which validation is based. 2 In the event that the competent Minister as prescribed by the Foreign Exchange and Foreign Trade Control Law indicates to the Foreign Investment Commission conditions with reference to payment to a foreign country relating to matters requiring validation by the Foreign Investment Commission pursuant to the provisions of this Law, the Foreign Investment Commission shall include the said conditions in the conditions prescribed in the preceding paragraph.

CHAPTER III Remittances Arising from Foreign Investment

(Remittance of Payment in return for Technological Assistance, etc.) Article 15. In the event that receipt by payment to a foreign country is expressly stated, in accordance with the provisions of Article 9, of return of technological assistance, dividends, interest or amortization of principal, and validation by the Foreign Investment Commission is obtained pursuant to the provisions of this Law, the said payment to a foreign country shall be deemed to be authorized pursuant to the provisions of Article 27 of the Foreign Exchange and Foreign Trade Control Law, subject to the conditions stipulated by the Foreign Investment Commission, if any, pursuant to the provisions of the preceding Article. 2 Unless authorized as provided for by Cabinet Order, the provisions of the preceding paragraph shall not apply to payment to a foreign country of dividends, interest or amortization of principal resulting from foreign investments made in national currency acquired other than by conversion of foreign means of payment, or the equivalent thereof.

(Recommendations concerning Remittance of Profits Arising from Business Activities) Article 16. Matters concerning licensing of payment to a foreign country of profits arising from legitimate business activities in Japan of exchange residents shall be referred beforehand by the competent Minister to the Foreign Investment Commission;the Foreign Investment Commission shall make recommendation thereon so as to assure equitable treatment compared with payments to a foreign country arising from matters requiring validation by the Foreign Investment Commission. 2 The above shall not apply in cases of minor importance or other cases prescribed by Foreign Investment Commission Regulations. 3 The competent Minister shall respect the recommendations of the Foreign Investment Commission on licensing the said payments to a foreign country.

CHAPTER IV Protection of Foreign Capital

(Protection of Foreign Capital) Article 17. In the event that the government, local public entities or other duly authorized persons expropriate or compulsorily purchase, on and after the enforcement of this Law, pursuant to procedures prescribed in a law other than the Foreign Exchange and Foreign Trade Control Law, the whole or a part of property legally owned in Japan by a foreign investor, the necessary funds shall be appropriated in the foreign exchange budget in order to assure payment to a foreign country of the amount receivable by the said foreign investor as the result of the said expropriation or compulsory purchase for the period of one year from the day of the receipt of the said amount. 2 In the event that a foreign investor uses the funds appropriated in the foreign exchange budget pursuant to the provisions of the preceding paragraph, it shall be deemed that payment to a foreign country has been authorized pursuant to the provisions of Article 27 of the Foreign Exchange and Foreign Trade Contro Law. 3 In the event that the whole or a part of the assets of a juridical person which is in fact controlled by a foreign investor through ownership of stock or proprietary interest, is expropriated or compulsorily purchased as prescribed in paragraph 1, above, similar treatment to that prescribed in the provisions of the preceding two paragraphs shall be extended to the stock or proprietary interest involved pursuant to the provisions of a law to be enacted separately.

CHAPTER V Adjustment of Investments and Business Activities by Foreign Investors

(Reference to Cabinet) Article 18. In the event that government agencies (government agencies other than the Fair Trade Commission, as defined in Article 3 paragraph 2 and Article 24 of the National Government Organization Law (Law No.120 of 1948);hereinafter the same) request Cabinet decision concerning important matters regarding investments or business activities of foreign investors, the said matters shall be referred beforehand to the Foreign Investment Commission. 2 The Foreign Investment Commission shall transmit its opinions concerning the matters mentioned in the preceding paragraph to the Cabinet.

(Recommendations of Foreign Investment Commission) Article 19. In the event that government agencies propose to license, validate, approve or take other administrative action with regard to investment or business activities of foreign investors, they shall refer the matters beforehand to the Foreign Investment Commission and request recommendations thereon. However, the above shall not apply in cases of minor importance or other cases prescribed by Foreign Investment Commission Regulation. 2 Government agencies, in taking administrative actions mentioned in the preceding paragraph, shall respect the recommendations of the Foreign Investment Commission.

CHAPTER VI Miscellaneous Provisions

(Appeal) Article 20. Any person aggrieved by the action taken by the Foreign Investment Commission pursuant to the provisions of this Law, may appeal to the Foreign Investment Commission by filing a petition in writing stating the substance of his grievance.

(Hearing) Article 21. The Foreign Investment Commission upon receiving such petition as mentioned in the preceding Article shall afford to the petitioner an opportunity for public hearing after reasonable advance notice. 2 The notice mentioned in the preceding paragraph shall state the time, place and issues involved. 3 At the hearing, opportunity shall be afforded for the petitioner and all interested persons to present evidence and argument with respect to the said issue.

(Decision) Article 22. The Foreign Investment Commission shall make the decision on the issues in writing, and copies thereof shall be delivered to the petitioner and other interested persons.

(Rules of Procedure) Article 23. Appropriate rules of procedure for appeals, notice, hearing and decision shall be provided for by Cabinet Order.

(Reports) Article 24. A foreign investor or the other contracting party shall report to the Foreign Investment Commission in accordance with its Regulation, when after having filed report or obtained validation as prescribed in the provisions of this Law, contract has been entered into or renewed, or stock or proprietary interest has been acquired.

(Powers, etc. of Fair Trade Commission) Article 25. The provisions of this Law, or the Powers of the Foreign Investment Commission pursuant to the provisions of this Law, shall not be construed to modify the provisions of the Law relating to Prohibition of Private Monopoly and Method of Preserving Fair Trade (Law No.54 of 1947) or of the Trade Association Law (Law No.191 of 1948), or the powers of the Fair Trade Commission pursuant to the said Laws.

CHAPTER VII Penalty Provisions

Article 26. Any person who comes under any one of the following items shall be liable to penal servitude not exceeding three (3) years or to fine not exceeding three hundred thousand (300,000) yen, or to both: (1) Any person who has violated the provisions of Article 10; (2) Any person who has violated the provisions of Article 11 paragraph 1; (3) Any person who has violated the provisions of Article 13 paragraph 1.

Article 27. Any person who has failed to file report pursuant to the provisions of Article 11 paragraph 2, or has filed false report and acquired stock or proprietary interest pursuant to the said paragraph shall be liable to penal servitude not exceeding one (1) year, or to fine not exceeding one hundred thousand (100,000) yen, or to both.

Article 28. Any person who has failed to make report pursuant to the provisions of Article 24 or has made false report shall be liable to penal servitude not exceeding six (6) months or to fine not exceeding fifty thousand (50,000) yen.

Article 29. When a representative of a juridical person (including organizations as defined in Article 3 paragraph 1 item (1), the same definition being understood in this paragraph), or an agent, employee or other worker engaged by a juridical person or a natural person, has committed acts in contravention of the preceding three Articles in regard to the business or property of such juridical person or natural person, the juridical person or natural person shall be liable to a fine specified in each Article in addition to the punishment of the offender. However, the above shall not apply when it is proved that due care and supervision has been exercised over the said business or property in order to prevent the aforesaid contraventions committed by an agent, employee or other worker engaged by the juridical person or natural person. 2 In case a juridical person as specified in Article 3 is to be punished, its representative or custodian shall represent it in its court action and the provisions of the laws concerning criminal prosecution applicable to an accused or suspect juridical person shall apply mutatis mutandis.