Japan Foreign Exchange and Foreign Trade Act (FEFTA) — Act No. 228 of 1949 (外国為替及び外国貿易法)

Mechanism

FEFTA was enacted on 1 December 1949 as a postwar foreign-exchange-control statute to manage Japan's scarce hard-currency reserves under the Bretton Woods fixed-rate system. Its original architecture required a positive-list licence for all foreign transactions. The 1980 revision (Act No. 65 of 1980, effective 1 December 1980) inverted this to a negative-list liberalisation framework, aligning Japan with OECD capital-account norms. The 1998 overhaul (effective April 1998) created the current administrative structure and transferred enforcement primacy from the Bank of Japan to MOF and METI.

FEFTA operates across three enforcement arms:

Arm 1 — Security Export Controls (METI). FEFTA Articles 25–25-7 authorise the Minister of Economy, Trade and Industry to control exports of goods and technology transfers. The operative implementing instruments are:

• Export Trade Control Order (輸出貿易管理令, Cabinet Order No. 378 of 1949): List-controlled

goods (Wassenaar Arrangement, Australia Group, MTCR, NSG, CWC controlled items). Requires Ministry of Economy Trade and Industry export licence.

• Foreign Exchange Order (外国為替令, Cabinet Order No. 260 of 1980): Controls on

cross-border technology transfers (intangible exports) — licences required for sensitive technology provision to non-Group-A countries.

• Catch-all controls (added 2002, overhauled October 2025 — see

2025-10-09-japan-meti-fefta-catch-all-controls-overhaul): require METI licence where the exporter has reason to believe an item — not itself list-controlled — may be used in WMD programmes or by conventional-arms-embargoed end-users.

• Japan classifies trading partners into Group A (26 allies with equivalent export-control

systems, including US, EU, Australia, UK), Group B, and Group C/D (progressively restricted), with licensing obligations calibrated accordingly.

Arm 2 — Inward FDI Screening (MOF + sector ministries). FEFTA Articles 26–27 govern inward direct investment. Foreign investors from non-exempt countries must file:

• Prior notification (事前届出): mandatory for acquisitions in "Core Designated Business

Sectors" (核心指定業種) added in the 2019–2020 reform — covering semiconductors, cloud computing, telecommunications infrastructure, advanced materials, aerospace, defence equipment, electric power, railways, broadcasting, and others (~220 sectors as of 2025).

• Post-investment notification (事後届出): covers acquisitions below the prior-notification

threshold (initially 10 %; reduced to 1 % for Core Sectors in the 2019–2020 reform).

• The 2025 amendment (2025-05-19-japan-fefta-inward-fdi-screening-amendment-2025)

introduced Type-A/B investor categories and eliminated most passive-investor exemptions, significantly increasing screening obligations for investors with foreign-government ties.

MOF's Foreign Investment Policy and Review Office coordinates inter-ministerial review; METI is the lead ministry in the majority of notified cases given its sectoral coverage. The National Security Secretariat may be involved for reviews with national-security implications.

Arm 3 — Autonomous Economic Sanctions (MOF). FEFTA Articles 16 and 21 authorise the Minister of Finance, by Cabinet Order, to impose asset freezes, payment restrictions, and capital-transaction prohibitions on designated foreign states, entities, and individuals for national-security or foreign-policy purposes. Japan's autonomous-sanctions architecture under FEFTA covers:

• Russia (cascade of Cabinet Orders 2022–2025, including the post-invasion SWIFTdisconnection, asset-freeze designations, and Russian-securities-issuance ban)
• DPRK, Iran, Myanmar, Belarus, Syria — ongoing designation regimes
• Individual designations coordinated through the Ministry of Foreign Affairs (MOFA) for

human-rights and non-proliferation cases

Japan does not have a separate sanctions statute equivalent to US IEEPA or UK SAMLA; all autonomous-sanction authority flows from FEFTA Article 16 (capital transactions) and Article 21 (goods + services trade prohibitions).

Legislative history and key milestones

Downstream implications

• FEFTA is the parent enabling authority for all filed Japan export-control and FDI-screening

actions: 2025-05-19-japan-fefta-inward-fdi-screening-amendment-2025 and 2025-10-09-japan-meti-fefta-catch-all-controls-overhaul are both amendments to and implementing orders under FEFTA.

• Japan's participation in the trilateral chip-equipment perimeter (US BIS–METI–Dutch ASML

coordination on advanced semiconductor equipment export controls) is operationalised entirely through METI's FEFTA export-control authority — FEFTA is thus the Japanese node of that perimeter.

• FEFTA's FDI screening regime is the primary mechanism through which Japan has de facto

blocked or conditioned Chinese investment in semiconductor, telecommunications, and cloud infrastructure companies since 2019.

• The autonomous-sanctions arm under FEFTA has been calibrated to coordinate with G7 Russia-

sanctions architecture (Western Russia sanctions theme) while remaining Japan's sovereign instrument — METI and MOF can designate autonomously without UNSC resolution.

Open questions

• Whether Japan will enact a standalone FDI or sanctions statute (SAMLA-equivalent) or

continue operating all three arms under FEFTA umbrella authority.

• Scope of the 2026 FEFTA review expected under the Economic Security Promotion Act

(2022) coordination mandate.

• Whether Core Business Sectors list will be expanded further to cover quantum technology,

biotechnology, and next-generation nuclear materials.