Scenario: a Vietnamese enterprise wants to buy 30% of an operating components manufacturer in Osaka. Management’s first question: does Japan require an “investment approval” like foreign share purchases in Vietnam — and which hurdle is most often missed?
Japan: FEFTA — a national-security screen, not a general investment permit
Japan has no general foreign-investment approval for every deal. Control sits in the Foreign Exchange and Foreign Trade Act (FEFTA): investments in designated sectors touching national security (arms, nuclear power, cybersecurity, critical infrastructure, dual-use technology and the like) require prior notification and may be ordered modified or stopped. Since the 2019 amendment (in force from 2020), the prior-notification threshold for designated sectors fell from 10% to 1% — even a small stake in a listed company in a sensitive sector trips the screen. Outside designated sectors, investors only file a post-closing report.
Merger control: the JFTC and domestic-turnover thresholds
The Japan Fair Trade Commission (JFTC) reviews concentrations under the Antimonopoly Act. Deals exceeding domestic turnover thresholds of the parties must be notified in advance, with closing suspended during the review period — the same principle as Vietnam’s concentration notification, but with entirely different thresholds and calculation methods that must be checked deal by deal.
Vietnam: capital-contribution registration plus concentration notification
Going the other direction, a foreign investor buying shares or capital contributions in a Vietnamese enterprise must pass the registration of capital contribution, share or stake purchase under the Law on Investment 143/2025/QH15 (effective 1 March 2026, replacing Law 61/2020/QH14) in the cases the law prescribes — typically where the target operates in conditional business lines, or the deal increases foreign ownership in such a line. Subsequent member/shareholder changes are registered with the business registration authority under the Enterprise Law 2020 (amended by Law 76/2025/QH15, effective 1 July 2025). Above the thresholds, parties must file an economic concentration notification under the Competition Law 23/2018/QH14 and Decree 35/2020/ND-CP (in force at the time of writing) before closing.
Due diligence: Japan is hardest on labour and language
Practical experience: the most painful part of DD on a Japanese company is not finance but labour — lifetime-employment culture makes dismissals near-impossible, so post-deal workforce restructuring costs are routinely under-priced; next come language (contracts and internal minutes in Japanese, where one mistranslated clause can flip an obligation) and supply-chain compliance. In Vietnam, DD bottlenecks usually sit in land, sub-licences and legacy tax exposures.
Quick comparison
| Criterion | Japan | Vietnam |
|---|---|---|
| Foreign-investment approval | FEFTA: prior notification only for designated sectors (1% threshold); otherwise post-closing report | Registration of capital contribution/share purchase with the investment registration authority in prescribed cases (Law 143/2025) |
| Merger control | JFTC, advance filing at domestic-turnover thresholds | Economic concentration notification (Law 23/2018 + Decree 35/2020) above thresholds |
| Capital-transfer tax | Seller may face capital gains tax in Japan; check the Vietnam–Japan double tax treaty | Organisations: CIT (Law 67/2025/QH15 + Decree 320/2025/ND-CP); individuals: PIT |
| Typical closing timeline | 3–6 months; longer if FEFTA/JFTC filings are triggered | 1–3 months depending on registration and concentration-notification duties |
Recommended actions
1. Determine immediately whether the target falls in a FEFTA designated sector — this decides the timeline. 2. Run JFTC and Vietnamese concentration thresholds in parallel from the term sheet. 3. Price Japanese labour-restructuring costs into the model. 4. Have every point of Japanese law confirmed by local counsel before signing.
Frequently Asked Questions
Does buying shares in a Japanese company need investment approval like M&A in Vietnam?
Not quite the same. Japan has no general investment permit: only national-security designated sectors require prior notification under FEFTA (1% threshold since 2020); other sectors need only a post-closing report. In Vietnam, foreign investors must register capital contribution, share or stake purchases in the cases prescribed by the Law on Investment 143/2025.
When does the FEFTA 1% threshold apply?
When acquiring shares in a company (including listed ones) operating in a national-security designated sector. Before the 2019 amendment the threshold was 10%; since the amendment took effect (2020) it is 1%, catching many small deals.
What thresholds does the JFTC use for merger review?
The domestic (in-Japan) turnover of the parties to the concentration. Above the thresholds, advance notification to the JFTC is required and closing must wait out the review period.
What is hardest in Japanese due diligence compared with Vietnam?
Labour (lifetime-employment culture, near-impossible dismissals, high restructuring costs), Japanese-language contracts and supply-chain compliance. In Vietnam the bottlenecks are usually land, sub-licences and legacy tax liabilities.
What tax applies on transferring shares in a Japanese company?
The transferor may incur capital gains tax in Japan depending on residence status and deal structure; the Vietnam–Japan double tax treaty should be checked before price finalisation. In Vietnam, organisations pay CIT and individuals pay PIT.
How long does a Japanese M&A deal usually take?
About 3–6 months where no prior FEFTA notification or JFTC review is triggered; materially longer when either screen applies, not counting labour DD which routinely overruns.
