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The upper house of the Japanese parliament passed a set of corporate laws Wednesday including one to legalize cross-border stock swaps that will make it easier for non-Japanese companies to acquire domestic ones. The government hopes the reforms will kick-start the moribund Japanese economy by boosting foreign direct investment, though in March it was forced to cave in to political and corporate pressure and delay their implementation. The U.S. and the EU have been lobbying hard for the legalization of cross-border stock swaps, also known as triangular mergers. This takeover strategy would allow a non-Japanese company to set up a local subsidiary in Japan as its acquisition vehicle, then use the parent’s stock as takeover currency. Nicholas Benes, president of M&A advisory firm JTP Corp. and a governor of the American Chamber of Commerce in Japan, welcomed the laws’ inclusion in the reform package but rued the fact that the provisions, so long in the making, won’t come into effect until next year at the earliest. Although officially law, implementation won’t happen until next year, ostensibly to allow companies to develop poison pill-type defenses against hostile takeovers. Benes put the delay down to “sheer emotionalism.” “We are concerned about the recent tendency to hyper-reactions in regard to M&A activity,” he said, noting that there have been no hostile takeovers of Japanese groups by foreigners to date. The bill’s passage wasn’t smooth. It was dealt an unexpected blow in March, when the Liberal Democratic Party, the major party in the ruling coalition, postponed a vote on the initiative in the wake of the takeover battle between Internet group Livedoor Co. Ltd. and Fuji Television Network Inc. for control of radio company Nippon Broadcasting System Inc. Foreign direct investment in Japan in 2004 was just $8 billion, compared with the $107 billion the U.S. attracted, according to the Organization for Economic Cooperation and Development. Copyright �2005 TDD, LLC. All rights reserved.

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