Japan rejected a proposal from Britain’s The Children’s Investment Fund yesterday, blocking the hedge fund’s efforts to raise its stake in a major electricity company because of potential disruptions to “public order.”
The London-based hedge fund had proposed raising its stake in J-Power — Japan’s largest electricity wholesaler — to as much as 20 percent from its current 9.9 percent.
It was the first rejection of such a proposal under a law that requires government approval before foreign companies can hold stakes of more than 10 percent in companies in sensitive sectors such as utilities, broadcasting and weapons manufacturing.
The standoff with The Children’s Investment Fund is raising questions here about how smoothly Japan has adapted to its self-trumpeted growing needs to open its markets to foreign investment.
Foreign investors have been blocked in high-profile takeover attempts recently, fueling fears that overseas investors will be discouraged when the nation sorely needs new capital to keep growth going.
Ministry officials, speaking on the condition of anonymity customary for bureaucrats here, said an increased stake could allow the fund to control decisions at J-Power, whose full name is Electric Power Development Co.
That could, in turn, hurt Japan’s overall energy policies, including a key nuclear power plant project, they said.
J-Power plans to build the plant in Oma, Aomori Prefecture for operation by 2012. It will run on MOX fuel, a uranium-plutonium mixture that includes recycled plutonium.
If such plans don’t go as scheduled, it could endanger the operation of a plutonium reprocessing plant and hurt Japan’s other nuclear power plants that are counting on the plutonium supply.
In an official reply yesterday, Japan recommended that the fund drop its plan to buy more J-Power shares, a trade ministry official said.
The fund has 10 days to respond. Disobeying the decision would be a crime under Japanese law.
Nobutaka Machimura, the top government spokesman, was quoted by Kyodo News as saying that a rejection of the fund’s bid won’t slow foreign investment into Japan.
“This case is straightforwardly related to national security,” he told reporters, adding that the fund is aiming for short-term profits.
A government advisory panel rejected The Children’s Investment Fund’s proposal to own more of J-Power late on Tuesday.
“The proposal may disrupt the maintenance of public order,” the panel said in a report.
Rahul Moodgal, head of investor relations and business development at The Children’s Investment Fund, said in an e-mail, “We have no comments to make at all.”
Other nations have ways to control stakes in firms considered critical to national security or energy needs. But it is a relatively new issue in Japan and highlights the country’s growing pains as it grapples with establishing checks on foreign investors.
In the past three years, the government approved 763 instances of foreign investors raising their stakes in sensitive sectors, the trade ministry said. But in some areas, foreign investors have run into roadblocks.
Last year, Japan’s Supreme Court rejected an appeal by US investment fund Steel Partners — one of the most visible funds aggressively investing in Japan — to block a sauce-maker’s takeover defense. That supported Bull-Dog Sauce Co’s dilution of Steel Partners’ stake to ward off its tender bid for a larger holding in the company.
Steel Partners has also run into resistance in trying to raise its stake in Japanese beer maker Sapporo Holdings Ltd.
Although mergers and acquisitions have grown in recent decades, many companies still tend to be run by an insular group of managers that seek passive consensus from stakeholders. Critics say Japan has a long ways to go in strengthening shareholder rights.
J-Power was privatized in 2004 under an economic reform program to wrest the world’s second-largest economy out of stagnation.
AIR SUPPORT: The Ministry of National Defense thanked the US for the delivery, adding that it was an indicator of the White House’s commitment to the Taiwan Relations Act Deputy Minister of National Defense Po Horng-huei (柏鴻輝) and Representative to the US Alexander Yui on Friday attended a delivery ceremony for the first of Taiwan’s long-awaited 66 F-16C/D Block 70 jets at a Lockheed Martin Corp factory in Greenville, South Carolina. “We are so proud to be the global home of the F-16 and to support Taiwan’s air defense capabilities,” US Representative William Timmons wrote on X, alongside a photograph of Taiwanese and US officials at the event. The F-16C/D Block 70 jets Taiwan ordered have the same capabilities as aircraft that had been upgraded to F-16Vs. The batch of Lockheed Martin
GRIDLOCK: The National Fire Agency’s Special Search and Rescue team is on standby to travel to the countries to help out with the rescue effort A powerful earthquake rocked Myanmar and neighboring Thailand yesterday, killing at least three people in Bangkok and burying dozens when a high-rise building under construction collapsed. Footage shared on social media from Myanmar’s second-largest city showed widespread destruction, raising fears that many were trapped under the rubble or killed. The magnitude 7.7 earthquake, with an epicenter near Mandalay in Myanmar, struck at midday and was followed by a strong magnitude 6.4 aftershock. The extent of death, injury and destruction — especially in Myanmar, which is embroiled in a civil war and where information is tightly controlled at the best of times —
China's military today said it began joint army, navy and rocket force exercises around Taiwan to "serve as a stern warning and powerful deterrent against Taiwanese independence," calling President William Lai (賴清德) a "parasite." The exercises come after Lai called Beijing a "foreign hostile force" last month. More than 10 Chinese military ships approached close to Taiwan's 24 nautical mile (44.4km) contiguous zone this morning and Taiwan sent its own warships to respond, two senior Taiwanese officials said. Taiwan has not yet detected any live fire by the Chinese military so far, one of the officials said. The drills took place after US Secretary
THUGGISH BEHAVIOR: Encouraging people to report independence supporters is another intimidation tactic that threatens cross-strait peace, the state department said China setting up an online system for reporting “Taiwanese independence” advocates is an “irresponsible and reprehensible” act, a US government spokesperson said on Friday. “China’s call for private individuals to report on alleged ‘persecution or suppression’ by supposed ‘Taiwan independence henchmen and accomplices’ is irresponsible and reprehensible,” an unnamed US Department of State spokesperson told the Central News Agency in an e-mail. The move is part of Beijing’s “intimidation campaign” against Taiwan and its supporters, and is “threatening free speech around the world, destabilizing the Indo-Pacific region, and deliberately eroding the cross-strait status quo,” the spokesperson said. The Chinese Communist Party’s “threats