Governments around the world are adopting new tools to help them monitor and control the ownership of industries critical to national security. This summer, new rules were passed in Japan that expanded the national security designation to high-technology industries, adding 20 sectors in the information and communications industries to the list of businesses for which foreign ownership of Japanese firms is restricted. The Cabinet on Friday approved draft legislation designed to further tighten rules, but while stricter scrutiny of foreign investments is warranted, the proposal goes too far.

The proposed legislation would lower the threshold at which overseas investors must report their intention to acquire a stake in a company in the industries of weapons manufacturing, power generation and communications. The current trigger is a 10 percent stake; the bill lowers it to 1 percent. That is too low. Akira Kiyota, head of the Tokyo Stock Exchange, called the proposal “absolutely idiotic.” That characterization makes plain the concern that has been created.

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