A British hedge fund, whose request to up its stake in a Japanese utility was rejected by the Japanese government, has said it will accept the decision.
The Children's Investment Master Fund wanted to increase its stake in Japan's Electric Power Development company - or J-Power - from 9.9% to about 20%.
But the Japanese government rejected it citing national security reasons.
The fund has said it will instead concentrate on improving corporate governance at J-Power.
"Disconcerting" decision
Japanese law states government approval is needed if foreign companies want a stake of over 10% in some sensitive sectors such as utilities or weapons manufacturing.
The government was worried that an increased stake would give the fund greater sway over decision-making at J-Power, which could have an adverse effect on the overall functioning of the country's utilities sector.
Despite the Children's Investment Master Fund disagreeing with the government's reasons, it has now said it will not be opposing it as the government is unlikely to change its mind.
"It is disconcerting that legitimate investors who want to improve corporate governance of privatised and listed companies can be so hastily characterised as threats to public order," said fund director John Ho.
Fears have now been raised about Japan's ability to attract foreign investment as several foreign takeover attempts have recently been rebuffed.
One recent example of Japan stalling foreign investment was the case of condiment company Bull-Dog Sauce.
American firm Steel Partners had wanted to take over the sauce company, but Bull-Dog employed the "poison-pill" tactic of threatening to dilute any Steel Partners' holding by issuing fresh shares of its own.
The US company appealed but its complaint was later rejected by Japan's Supreme Court.
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