Restrictions Relating to Investment in Entities Holding Infrastructure in Japan

Abstract

On May 17, 2010, the Growth Strategy Meeting set up in the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) issued a report on growth strategy (“GSM Report”). The GSM Report recommends as a basic principle the creation of a new market environment consisting of the following pillars: (i) intensive allocation of public investment according to costeffectiveness; (ii) relaxation of regulation, and facilitation of private sector proposals and bold management; (iii) active use of private sector’s wisdom and fund through public-private partnership (PPP) and private fund; and (iv) cooperation with private sector and promotion of talent. With regard to an international operation and cooperation with private sector, the GSM Report recommends: (a) formation of infrastructure fund; and (b) use of PPP and Private Finance Initiative (PFI). The infrastructure mentioned in the GSM Report includes airport infrastructure, port infrastructure, highway infrastructure, railway infrastructure, and sewage infrastructure. The measures for facilitation of PPP and PFI mentioned in the GSM Report includes introduction of concession method in infrastructure sector, privatization of government-affiliated corporation, improvement of tax for promotion of PFI, and measures allowing the participant to sell to a third party its shares in special purpose vehicle used in the PPP and PFI. On June 1, 2010, the Ministry of Economy, Trade and Industry (METI) released a report on the Industry Structure Vision 2010, which recommends for improvement of industrial finance such measures as improvement of tax for foreign fund and tax exemption or corporate bond interest. We here review environment on foreign direct investment in Japan and investment in infrastructure.