The Japanese Ministry of Internal Affairs and Communications (MIC) plans to revise to the Radio Law to limit foreign ownership of domestic broadcasters by including indirect shareholdings for the first time, according to Bank of Tokyo-Mitsubishi (BTM).
Under the Radio Law, foreign direct ownership of Japanese broadcasters is limited to 20% of the total share with voting rights. If foreign ownership exceeds 20%, a broadcaster’s license is revoked. However, there is no regulation in regards to indirect holding of Japanese broadcasters in which a foreign company indirectly holds Japanese broadcaster’s shares through its Japanese investment destination.
Indirect holding means that even if an FOL share was acquired by a Japanese company, if the shares of the Japanese company are owned by a foreign company, a part of the FOL share is considered as held by a foreign company depending on the ratio of its shareholding.
When the revision is approved, foreign ownership of Japanese broadcasters exceeding 20% of the total shares will be prohibited for both direct and indirect investment. Under the proposal, for example, if a Japanese company, which is owned by a foreign company for 50% of its voting rights, holds 30% of a Japanese broadcaster’s shares, the foreign company is considered as holding 15% of the Japanese broadcaster.
MIC’s proposal regarding restrictions on indirect shareholding is based on the NTT Law which stipulates that if a foreign investment ratio to a Japanese company is less than 10%, or if investment to NTT is less than 10%, the regulation regarding indirect shareholding will not be applied. The above percentages are also under the discussion as for the revision of the Radio Law.
According to BTIM, the handling of FOL shares after the dematerialization of securities certificates is still under discussion, but the administration of FOLs would become more complicated if the shares are dematerialized.