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A private survey has found that nearly 90 percent of institutional investors are worried about the possible negative effects of a law revision that tightens restrictions on foreign investment.

According to the survey, 86 percent of responding institutional investors worldwide believe the revised foreign exchange and trade law could negatively affect foreign investment in Japanese stocks.

Enacted in November, the revised law requires foreign investors to notify the government before acquiring a stake of 1 percent or more in listed companies in national security-related fields such as weapons, nuclear energy and semiconductors.

The threshold is far lower than the current 10 percent. The revised law is expected to take effect around May next year.

Organizations including the CFA Society Japan conducted the survey from Nov. 15 to 27, collecting answers from 115 institutional investors working for asset management companies, banks, life insurance businesses and others.

Institutional investors will be exempt from the tighter regulations unless they demand a position on the company’s board or the transfer or discontinuance of a key business.

But many respondents are critical of what they see as an attempt to restrain shareholders from exercising the right to submit proposals.

Of the respondents, 70 percent opposed the revised law, citing the stricter requirement and the wide range of companies the obligation covers.

A respondent said the revised law is intended to suppress activist shareholders, and another commented that it bucks the current trend of improving corporate governance.

Market players say the scope of exemption is unclear and that details of the revised law are not widely known abroad because the government is not proving enough information in English.

The Finance Ministry is drawing up related ordinances.

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