Foreign Direct Investment, Public Interest and Corporate Governance: Japan's Recent Experience

Abstract

As in many other countries, the Japanese government has been keen on both inviting foreign direct investment into the domestic market and protecting against the threat to the public interest that could be caused by foreign ownership. As compared with the discussions in Europe and the US, the arguments in Japan miss the point that the possibility of takeover is an important mechanism to discipline corporate governance of publicly held companies. As a result, the efforts to reconcile the discipline by the market for corporate control with the minimum need to protect the public (national) interest, which have been the core of the arguments on this issue in Europe and the US, were never seriously considered in Japan.

Keywords: corporate governance, Japanese corporate law, foreign direct investment, golden share, special rights, Exon-Florio Amendment, market for corporate control

JEL Classification: K22, K23, K33, G34