The Japanese government is looking at tightening regulations on foreign funds that hold stakes in domestic firms with important technology in areas such as nuclear power and defence, the Yomiuri newspaper reported on Wednesday.

The new rules will aim to prevent overseas funds and companies from slapping demands on Japanese companies that may weaken their competitive edge or lead to the leaking of technological expertise, the paper said, without citing sources.

The question over just how far the government has the right to intervene in shareholder matters has been in focus since an independent investigation found Toshiba Corp management colluded with the trade ministry to pressure foreign investors.

In the wake of the probe, Japan’s trade minister said it is normal for government to deal with individual companies when matters of national security are at stake and the policies the trade ministry implemented were “natural”.

The government plans to come up with specific measures by the end of this year, the paper said.

A trade ministry official denied the report, saying they were not considering tightening regulations. The finance ministry was not immediately available to comment.

The Yomiuri said new rules could require foreign funds that break the new rules to sell their holdings of the Japanese firms.

With the new rules, the government would support the retention and development of technology deemed important even after foreign funds have already made their investment, it added.

Any new measures would follow tighter foreign ownership rules on hundreds of firms designated as having operations core to national security that took effect in May last year.

Foreign investors buying a stake of 1% or more in such core firms have since faced pre-screening in principle, compared with the previous threshold of 10%.

The sectors selected as crucial to national security include areas such as oil, railways, utilities, arms, space, nuclear power, aviation, telecoms and cybersecurity. – Reuters