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13 April 2024

Japan airport puts off foreign stake rule

By Agencies

Japan's government appears set to put off a decision on limiting foreign ownership in airports until next year or later, delaying a key test of how open the world's second-largest economy is to foreign investors.


The transport ministry had been preparing to submit to parliament a bill with a clause limiting foreign stakes in airports to under a third of voting shares, prompting criticism that the move would damage investor perceptions of Japan.


But the Nikkei business daily said on Thursday that the matter would be shelved by removing the contentious clause, with a final decision unlikely until 2009 or later.


Australia's Macquarie Airports owns nearly 20 per cent of Japan Airport Terminal Co, which runs Tokyo's busy Haneda Airport.


A transport ministry official said that several options were being considered and nothing was final, but shares still took heart. Japan Airport Terminal surged nearly 6 per cent.


"Japanese stocks have suffered from perceptions that Japan was a 'closed country,' so this is positive," said Takeshi Osawa, senior fund manager at Norinchukin Zenkyoren Asset Management.


Analysts said the move was little more than stalling to avoid hard decisions during a time of political gridlock.


Foreign investment in Japan has long lagged other nations, and investors have been especially leery after the reformist Prime Minister Junichiro Koizumi left office in 2006.


"If they do fall down on the side of allowing it to happen, I think that's a pretty good antidote to the disappointment of foreign investors since Koizumi," said Darrel Whitten, managing director at Investor Networks.


"But the situation now is neutral – they're just trying to put it aside for a while so this other stuff can blow over."


Despite having nearly doubled in the past five years, foreign investment was just 2.4 per cent of Japan's GDP in 2005 versus 13 per cent in the United States and 14 per cent in Britain.


Japan attracted about $43 billion (Dh157.81 billion) in foreign investment in 2006, up 60 per cent from 2005, amid a global boom.


But a court decision last year to label US hedge fund Steel Partners an "abusive acquirer" in its takeover attempt for Bull-Dog Sauce Co last year put off many foreign investors.


In another key test case, British activist fund TCI said last week that it would take the Japanese government to court if it rejected its bid to raise its stake in Electric Power Development Co on national security grounds.


Foreign investors are required to seek approval before taking more than 10 per cent of a company in sectors deemed vital to the country's security.


Whitten noted that despite the positive impact of lifting the airport stake limit, this case is different.


In 2006, a Dubai company's purchase of operations at key US ports caused such an outcry among US lawmakers that the firm said it would sell the assets.


"It's a question of national strategy. I don't think Western nations can sit there and wag their fingers at Japan for saying no to this one," Whitten said. (Reuters)