To protect Japan's advanced machine tool technology, the Japanese government has blocked foreign capital from acquiring domestic machine tool companies.

The front page of Asahi Shimbun reported that the Japanese government has issued recommendations to halt the acquisition of the renowned Japanese machine tool company Makino by the Asian fund MBK Partners. This decision was made due to security concerns, as Makino’s machine tools are used in manufacturing Japan’s defense equipment. MBK Partners issued a statement on the 23rd saying, “We are very surprised by this development,” and will inform the government by May 1 whether it will respond.

On the 22nd, the Ministry of Finance and the Ministry of Economy, Trade and Industry issued recommendations under the Foreign Exchange and Foreign Trade Act to cancel the transaction. On the morning of the 23rd, Finance Minister Sakaoka Kazuki explained the rationale for this decision during a session of the House of Councillors Committee on Finance, stating: “Makino milling machines are among the world’s leading manufacturers of machine tools and are widely used by Japan’s defense equipment producers.” “We reviewed this case, taking into account the impact on domestic production bases and technological foundations related to national security, as well as the potential risk of leakage of sensitive technologies or information tied to national security,” he said.

Furthermore, Finance Minister Sakaoka told reporters at the Ministry of Finance: “The principle of the Foreign Exchange Act is free foreign exchange transactions, and the belief that sound investment is crucial to Japan’s economic development remains unchanged.”

Machine tool technology is classified as a “core industry” subject to foreign investment regulation from a security standpoint. The Foreign Exchange and Foreign Trade Act stipulates that if overseas companies or investors hold a certain threshold of shares in firms engaged in critical businesses related to Japan’s national security, they must undergo preliminary review by the government. In light of changing security environments, the government has strengthened its defense industrial base and relaxed arms export restrictions on the 21st, aiming to expand overseas markets for domestic defense enterprises.

A source familiar with the matter noted that this decision reflects the growing importance of defense sectors within Japan’s industrial strategy and the influence of arms export control reviews. Another official clarified: “This does not mean Japan intends to discourage foreign investment.”

Professor Shun Hisano from the School of International Relations at Asia University, specializing in economic security, said: “Once advanced technology leaks abroad, it cannot be recovered. From a security perspective, the government’s decision to prohibit such acquisitions is understandable. This is a special measure limited to extremely critical fields and is unlikely to be abused,” he stated.

MBK Partners is an investment fund focused on Northeast Asia, founded by Michael Kim, a Korean-American. In June 2025, MBK announced a tender offer (TOB) for Makino. The offer price was set at 11,751 yen per share, with the acquisition plan scheduled to begin in early December of the same year, aiming to become a wholly owned subsidiary. However, the review process by various regulatory authorities takes time. Although approvals have been granted by countries including the United States, China, and Italy, Japan’s review remains pending. MBK expects to launch the TOB by the end of June this year, after securing all necessary approvals.

The TOB contract signed between Makino and MBK remains valid. Makino told Reuters: “We must consider multiple options to enhance corporate value and maximize shareholder value—including the option of remaining listed” (Office of the President, Corporate Planning Department). He added that he had no direct communication with MBK, and that information was primarily obtained through advisors.

Regarding Makino, although the original plan involved acquisition by Denso, Makino launched countermeasures against the takeover. Denso subsequently announced its withdrawal in May of the same year. Following this, Makino received a legally binding acquisition proposal from MBK.

This marks the second time the Japanese government has ordered the cancellation of an investment in a domestic company under the Foreign Exchange and Foreign Trade Act. In 2008, the UK-based investment fund Children’s Investment Fund (TCI) had its planned purchase of power development shares canceled upon government recommendation.

Original article: toutiao.com/article/1863269159713792/

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