Japan Financial Services Agency publishes ministerial explanation of recommendation to halt MBK’s Makino Milling Works acquisition under the Foreign Exchange Act

The Japan Financial Services Agency published a summary of a press conference in which Japan’s Minister of Finance confirmed that the government has recommended suspending the Foreign Exchange Act notification related to MBK’s acquisition of shares in Makino Milling Works, on national security grounds. The minister said MBK intends to make Makino Milling Works a wholly owned subsidiary and that the company is a leading machine tool manufacturer whose products are widely used by Japanese defence equipment manufacturers. The Ministry of Finance and the Ministry of Economy, Trade and Industry assessed the potential impact on national-security-related production and technology bases and the risk of leakage of sensitive technology or information, and concluded after council discussions that the investment may cause a situation that could undermine national security, making a suspension recommendation essential. He declined to address market speculation about resale to China and did not disclose details of the review process, while reiterating that the Foreign Exchange Act is based on the principle of freedom of foreign trade and that sound investment remains important for Japan’s economic development. He said the notifier will consider whether to accept the recommendation, and when asked whether a cease-and-desist order could come into view if agreement is not reached by 1 May, he referred the technical aspects of the process to administrative staff.