Japan's Two-Speed Welcome: Foreign Buyers Took a Record ¥6.2 Trillion of Japanese Companies by September — as Tokyo Raised the Bar for Who Buys, Who Stays and Who Owns

The numbers are not subtle. According to RECOF data reported by Nikkei on October 13, foreign investors acquired 326 Japanese companies between January and September 2026, more than 20% more than a year earlier. The value of those deals reached about ¥6.2 trillion, up 40% and already above the full-year total for 2025, which itself had been a record at ¥6.2 trillion across 372 deals. Over the same nine months, the total value of all M&A involving Japanese companies fell 20% to ¥22 trillion. In other words, while Japanese buyers paused, foreign buyers sped up.

Three forces explain it. The weak yen makes Japanese assets cheaper in dollars and euros. Tokyo Stock Exchange pressure on companies trading below book value, and the steady unwinding of cross-shareholdings, have put more subsidiaries and non-core businesses up for sale. And founders of mid-sized companies, many of them past retirement age with no successor, are selling. The result shows up in the long-run data too: Japan's inward FDI stock reached a record ¥61.2 trillion at the end of 2025, up ¥7.9 trillion in a single year, according to Cabinet Office figures based on Ministry of Finance and Bank of Japan statistics. The government's targets are ¥120 trillion by 2030 and ¥150 trillion in the first half of the 2030s; reaching ¥120 trillion would take growth of about 14% a year, roughly what 2025 delivered.

This week brought a clear example of how foreign firms are using M&A to enter Japan. On October 20, Bloomberg reported that Natixis, the corporate and investment banking arm of France's BPCE, had agreed to buy Sangyo Sosei Advisory, a Tokyo firm founded in 2009 and described as Japan's first independent financial adviser, with a focus on technology, media, telecoms and infrastructure. The price was not disclosed, and the deal needs approval from the Financial Services Agency. Co-founder Gary Chan, a former UBS managing director, will lead a new investment banking, real assets and M&A business, and the team joins Natixis's Japan branch on January 1, 2027. Citigroup, Goldman Sachs and UBS have all hired senior dealmakers in Tokyo this year. Building an advisory franchise from scratch in Japan takes years of relationships; buying one takes a quarter.

The same buyers now face a sharper screen. The Diet passed amendments to the Foreign Exchange and Foreign Trade Act (FEFTA) on May 29, 2026; they were promulgated on June 5, the Japan Foreign Investment Committee was set up on June 29, and the implementing regulations were published on September 16. The main changes take effect on January 4, 2027, and after a 30-day transition they generally apply to investments made from February 3, 2027. The committee is co-chaired by the Ministry of Finance and the National Security Secretariat, with MOFA, METI and the Ministry of Defense as core members — law firms have already nicknamed it Japan's CFIUS.

Three changes matter most for foreign companies. First, indirect deals: if a foreign investor buys 50% or more of an overseas company that itself holds shares in a Japanese company, that offshore deal can now need prior notification in Japan. For investors classed as high-risk, the threshold drops to 1% of a listed Japanese company or a single share of an unlisted one. Second, a call-in power: for high-risk investors taking 10% or more of a Japanese company outside the designated sectors, authorities can investigate for five years after closing. Third, the list of sensitive sectors is redrawn around what a business does — cybersecurity, cloud and data centres, AI and advanced robotics — and adds magnetic sensors, some ship-hull manufacturing and certain pharmaceuticals.

This is where the AI story meets the M&A story. A foreign software or AI company that takes a stake in a Japanese data centre operator, a robotics start-up or a cloud reseller is now squarely in the screened zone, even if the deal is signed in Singapore or Delaware. Enforcement is already real: in April 2026, authorities recommended that MBK Partners drop its bid for Makino Milling Machine, the first such recommendation in about 18 years, and Yageo's 2025 tender offer for Shibaura Electronics was cleared only with mitigation measures after roughly seven months of review. Most deals still clear. But a clean deal now needs a clean holding chain, and time in the plan for the review.

If FEFTA governs who can buy, immigration rules govern who can stay to run what was bought. On October 1, 2026, the fee for permanent-residence permission rose from ¥10,000 to ¥200,000, and fees for changing or extending a residence status now scale from ¥33,000 for one year to ¥75,000 for five years or more. Revised permanent-residence guidelines apply an income test to applications filed from October 1, with the full revised guideline applying from April 1, 2027. For a foreign company relocating ten managers and their families, the paperwork budget has gone from a rounding error to a line item.

The founder route is narrower too. Since October 16, 2025, the Business Manager visa has required ¥30 million in paid-in capital, up from ¥5 million, along with at least one full-time employee, Japanese at JLPT N2 level held by the applicant or a staff member, and three years of management experience or a relevant graduate degree. Existing holders have until October 16, 2028 to comply — which means renewals in the next two years are where small foreign-owned businesses will feel it. In May, a petition with 53,000 signatures asked the government to revisit the rules; it has not.

Property is the third gate. Since October 5, 2026, when an individual is newly registered as an owner of land or a building, their nationality is recorded in the registry's internal search file, backed by a passport or residence card. It is not printed on the public certificate, it does not restrict ownership, and companies are excluded. But it gives the state data it did not have, and it arrives as Prime Minister Sanae Takaichi's government prepares a broader basic policy on foreign residents, which she has pledged to finalize by the end of the fiscal year in March 2027, and as the ruling coalition has promised legislation on foreign land purchases. Read together, the direction is consistent: Japan is not closing to foreign capital, it is asking that capital to be visible, resident and committed.

Japan wants foreign capital that brings substance.

Days 1–30: map the chain. List every Japanese company in which you, your parent, your funds or your co-investors hold shares, directly or through an overseas entity, and check each against the redrawn sector list — especially anything touching cloud, data centres, AI, robotics or cybersecurity. If a deal you are negotiating will close after January 4, 2027, assume the new rules apply and ask counsel whether an offshore step in your structure now triggers a Japanese filing. Build a buffer into the timetable: Yageo's review took about seven months.

Days 31–60: price the people. Put residence fees, Business Manager capital and Japanese-language staffing into the entry budget, not the contingency line. If your Japan presence today rests on a founder's Business Manager visa, plan the 2028 renewal now: either capitalize the entity to ¥30 million and hire the required employee, or restructure so that staff come in under an intra-company transfer from a properly funded subsidiary. If you hold or plan to buy property, decide deliberately whether a person or the company should be the registered owner — the October 5 rule applies only to individuals, while FEFTA's existing post-acquisition reports for non-residents still apply either way.

Days 61–90: decide build versus buy. The inbound numbers show that the fastest foreign entrants in 2026 are buying. Natixis did not hire a team and wait for mandates; it bought a 17-year-old firm with relationships, a track record and a regulator's familiarity. For a foreign company with a Japan plan, a small, well-chosen acquisition — a distributor, an agency, a systems integrator with succession problems — can deliver licences, clients and bilingual staff at once, and a clean FEFTA file becomes an asset in the negotiation. This is the work Medusa Japan does with clients from Osaka: matching foreign companies with the right Japanese partner or target, and building the local brand and AI tooling that make the first year count.