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Exclusive: Japan considers tighter ownership reporting rules to better monitor China, officials say

FILE PHOTO :High-rise buildings are seen at the Shinjuku business district during sunset in Tokyo
FILE PHOTO :High-rise buildings are seen at the Shinjuku business district during sunset in Tokyo

TOKYO (Reuters) - Japan is considering lowering the 10% ownership threshold at which foreigners are required to report a stake in domestic companies, two officials said, as Tokyo looks to better monitor potential Chinese investment in areas related to security.

Such a move would follow similar steps taken by the United States and European countries in recent years and reflects growing unease in Japan about the possibility that Chinese state-backed companies could gain access to key technology.

"We need to strengthen monitoring for national security but we don't want to hinder foreign direct investment itself," said one of the officials, both of whom declined to be identified because the talks have not been made public.

While Japan can't explicitly target a single country under the reporting rules, the move would be aimed at strengthening monitoring of Chinese investment, the official said.

Under current rules, a foreign entity is required to report ownership in a Japanese firm once it plans to take at least a 10% stake. The change would see that threshold lowered, although the amount is still under discussion, the officials said.

"The United States and Germany have taken similar measures aimed at China. Japan is much further behind when it comes to protecting the security of its economy," the second official said.

(Reporting by Takashi Umekawa; Editing by David Dolan)