Having gained encouragement and some success during the rule of Prime Minister Shinzo Abe, foreign activist investors may be about to find Japan turning less hospitable. The government should be wary of alienating an ally that has aided its campaign to improve shareholder returns at the nation's companies.
Overseas investors will have to report when they buy 1 percent of a company related to national security, down from 10 percent now, under new rules now deliberated in the Diet.
While the Finance Ministry has released a list of exemptions following opposition from market participants, hedge funds and private equity investors remain perturbed amid a lack of clarity over how the law will be applied.