FEFTA, Visas, and Foreign Ownership Practicalities in Japan

The three regulatory layers, in one view

Foreign buyers tend to imagine a single "approval" hurdle. In practice you're managing three mostly independent layers:

1. FEFTA — Japan's foreign investment screening under the Foreign Exchange and Foreign Trade Act (外為法). Determines whether you file before the deal (with a waiting period) or after it (routine reporting).
2. Immigration — only if a foreign individual will live in Japan and run the company. The Business Manager visa is the main path.
3. Practical infrastructure — bank accounts, financing, the seller's personal guarantee, and the registered representative of the company. Not law, but this layer delays more deals than the first two combined.

Nothing here is a reason not to proceed. Everything here is a reason to sequence properly.

Layer 1: How FEFTA actually works

The basic mechanics

Under FEFTA, a "foreign investor" (non-resident individuals, foreign entities, and Japanese entities they control) making an inward direct investment — which includes acquiring shares of an unlisted Japanese company — must file either:

• Prior notification (事前届出): required when the target conducts business in a designated sector. Filed through the Bank of Japan to the Ministry of Finance and the sector ministry before closing, with a statutory review period (30 days, routinely shortened to about two weeks for uncontroversial cases, extendable for sensitive ones). The government can recommend modification or block the transaction — rare in absolute terms, and overwhelmingly concentrated in genuinely sensitive cases.
• Post-facto report (事後報告): for everything else — filed after closing within the prescribed deadline. This is a reporting exercise, not an approval.

For listed companies the thresholds start at 1% of shares; for the unlisted SMEs relevant to succession buyers, any share acquisition from a non-foreign seller is within scope, so the real question is only which filing route applies.

The designated-sector trap for SME buyers

The designation list is granular — it works off detailed business classification codes and has been expanded repeatedly (notably in 2019–2020 around technology and health, and later to cover semiconductors, batteries, critical minerals, and cybersecurity-adjacent areas). This is where ordinary-looking succession targets surprise buyers:

• A precision machining shop whose parts end up in defense or aerospace supply chains
• A small software company whose products touch security functions
• Chemical producers, certain materials processors, and some medical-device-adjacent manufacturers
• Anything with its own telecom or broadcast licenses

The practical rule: run the target's actual activities against the current designated-sector classifications during early diligence — your Japanese counsel does this quickly — and never let the FEFTA question surface for the first time at signing. Also note that separate statutes cap foreign ownership in specific industries (broadcasting, airlines, telecom's NTT) that rarely matter for SME succession but exist.

What FEFTA means for your timeline, honestly

• Ordinary SME outside designated sectors: days of admin, post-close.
• Designated sector, benign profile: two to six weeks added before closing, plan around it.
• Designated "core" sector with a sensitive buyer profile: real review. Get specialist counsel and engage early.

Layer 2: The visa path for owner-operators

The Business Manager status of residence

If you intend to live in Japan running your acquired company, the standard route is the Business Manager visa (経営・管理, keiei kanri). Historically its core requirements were a real office in Japan plus either ¥5 million in capital or two full-time employees, with a credible business plan.

Important: Japan announced a substantial tightening of these requirements in 2025 — reported changes included raising the capital requirement dramatically (to the tens of millions of yen), requiring relevant management experience or qualifications, and stricter business-plan scrutiny. Rules in this area are now moving; treat any specific figure you read (including here) as a prompt to verify current requirements with an immigration lawyer, not as a number to build a structure on.

Points that matter for acquisition (rather than startup) cases:

• Buying an existing company with real revenue and employees is generally a stronger Business Manager case than a startup — the business plan is the operating history.
• Status is typically granted for one year initially, renewed on evidence the business operates and you actually manage it. Chronic losses or a shell arrangement put renewals at risk.
• Family members can accompany under dependent status; long-term, the Business Manager track can lead to permanent residency, with the highly-skilled-professional points system sometimes accelerating this for qualified buyers.

If you won't relocate

Ownership without residence is straightforward legally. Practically, you'll want a Japan-resident representative director or manager: banks are reluctant to deal with wholly non-resident-run companies, and day-to-day obligations (social insurance filings, tax representative, licenses) need someone on the ground. Sellers also read absentee ownership as a continuity risk — address it explicitly in how you present your plan.

Layer 3: The practical infrastructure (the real bottleneck)

• Bank accounts. Opening a corporate account as a foreign-controlled entity is notoriously slow with megabanks; regional banks and Japan Post can be more pragmatic, especially post-acquisition when the target already banks there. Keep the target's existing banking relationships alive through the transition — they are an asset.
• The personal guarantee. Most SME debt carries the owner's personal guarantee (経営者保証). At closing the seller will want release; the bank will want a substitute — your guarantee, collateral, or refinancing. Government guidelines discourage automatic guarantee demands, and practice has improved, but resolve this early with the incumbent bank because it can otherwise stall a signed deal.
• Financing. As covered in the buyer's guide, assume equity-heavy funding for a first deal. Japan Finance Corporation (日本政策金融公庫) has succession loan programs and has become more accessible to foreign-resident entrepreneurs than commercial banks; local Credit Guarantee Associations support succession lending but work through relationship channels.
• Professional team. Minimum viable: a bilingual judicial scrivener or lawyer for the transfer, a tax accountant who knows small-M&A structuring, and — for designated-sector or visa questions — the relevant specialist. This costs single-digit millions of yen and prevents eight-digit mistakes.

Sequencing: a sane order of operations

1. Thesis stage: check whether your target sectors intersect FEFTA designations at all; decide residence intentions; get a current read on Business Manager requirements.
2. Search stage: establish your entity/structure plan and, if relocating, your visa strategy with counsel — before you're in exclusivity with an anxious 75-year-old seller.
3. LOI stage: confirm the target's precise business codes against the designation list; open the guarantee-release conversation with the incumbent bank.
4. Diligence/signing: file prior notification if required; build the waiting period into the closing calendar.
5. Close/post-close: post-facto FEFTA reports where applicable; visa application or renewal with the acquired business as evidence; bank account and representative arrangements finalized.

Run in this order, the regulatory layer is calendar time, not deal risk — which is exactly what you want it to be.

This guide describes the landscape as we understand it and is not legal advice. Rules — especially visa requirements — have been changing; verify current requirements with qualified Japanese counsel before acting.