Foreign Exchange and Foreign Trade Act (Japan, 1949, amended 2019)

Japan's Foreign Exchange and Foreign Trade Act, Act No 228 of 1949, is a framework statute governing external payments, capital transactions, trade, technology transfers and inward investment. It supports security export controls, economic sanctions and foreign-investment review, but operative restrictions usually depend on Cabinet orders, ministerial ordinances, notices and case-specific decisions.

Institutional and legal structure

The Ministry of Economy, Trade and Industry administers principal export and technology-transfer controls. The Ministry of Finance administers foreign-exchange and much inward-investment procedure, with sector ministries participating in investment review. The responsible authority therefore depends on whether a case concerns goods, technology, payment, asset measures or investment.

List controls require permission for specified goods or technologies. Catch-all controls can apply based on end use, end user, destination and notice from METI. Sanctions implemented under the Act may restrict payments, capital transactions, exports or imports through separate instruments. None of these effects follows from the framework title alone.

Residents and non-residents can face different duties under the foreign-exchange provisions. Technology transfer may occur without shipment of a physical good. Classification, end-use information and the applicable ministerial order must therefore be resolved before treating an activity as licensed or prohibited.

The 2019 investment-screening amendment lowered the general prior-notification threshold for acquisition of shares in a listed Japanese company in a designated business sector from 10 per cent to 1 per cent. The amended system took effect in May 2020 and includes exemptions with conditions. A 1 per cent holding is therefore not automatically prohibited or rejected. Notification, exemption, review, recommendation and order are separate stages.

Japan further amended the investment-screening branch in 2025 and 2026. Rules effective on 19 May 2025 narrowed exemption access for specified investors. An amending Act promulgated on 5 June 2026 addressed risk-mitigation measures, indirect investment and investment under the control or strong influence of specified high-risk foreign persons. Its implementing regulations were still being developed on 30 July 2026. Promulgation should not be reported as if every new rule were already operative.

South Korea measures and later revision

On 1 July 2019, METI announced a change to licensing practice for exports to the Republic of Korea of hydrogen fluoride, fluorinated polyimide and photoresist. Individual licensing began on 4 July. Japan separately decided on 2 August to remove Korea from the preferential country group, effective 28 August. These were separate export-control decisions under FEFTA instruments.

Japanese officials described the measures as export-control administration based on security concerns. South Korea challenged them and political observers widely treated them in the context of a bilateral dispute. Retaliatory purpose should therefore be attributed rather than stated as an adjudicated fact.

In March 2023, METI revised licensing operations for the three items from individual to general bulk licensing. A Cabinet-order amendment restored Korea to Appended Table 3, effective 21 July 2023. The 2019 settings are not the current bilateral position.

Strategic significance and limits

FEFTA consolidates several statecraft functions within one legislative framework. It allows Japan to restrict sensitive transfers, implement multilateral sanctions and screen investment in designated sectors. Effectiveness depends on the implementing measure, industry concentration, allied coordination, enforcement and substitution.

The statute is not a general power to stop any foreign transaction for strategic reasons. Publication-day analysis must identify the current Japanese text, implementing order, competent ministry, threshold, exemption and transaction date.

See also

Export-control licensing regime · investment screening · Technology denial · Japan · South Korea · Coalition sanctions and export controls against Russia after the full-scale invasion of Ukraine (2022-present)

Sources

1. Government of Japan, Foreign Exchange and Foreign Trade Act, Act No 228 of 1949, English translation.
2. Ministry of Finance, Foreign direct investment review guidance and documents, checked 30 July 2026.
3. Ministry of Economy, Trade and Industry, Update of licensing policies and procedures in relation to the Republic of Korea, chronology checked 30 July 2026.
4. Ministry of Economy, Trade and Industry, Cabinet decision adding the Republic of Korea to Appended Table 3, 27 June 2023.
5. Ministry of Finance, The Act Partially Amending the Foreign Exchange and Foreign Trade Act, 5 June 2026.
6. Ministry of Finance, News and communications on foreign investment screening, including the 3 July 2026 draft regulations, checked 30 July 2026.