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* Toyota, Sony among 518 firms under new foreign ownership rules
* Foreigners buying 1% or more in core firms face tighter scrutiny
* Japan in step with U.S., Europe to counter China security risk
* Revised law aimed at encouraging foreign direct investment - Aso
By Tetsushi Kajimoto and Daniel Leussink
TOKYO, May 8 (Reuters) - Japan announced on Friday a list of its firms subject to tighter foreign ownership rules, including majors such as Toyota Motor Corp and Sony Corp , as the United States and Europe step up scrutiny of industries key to national security.
Japan identified 518 of its roughly 3,800 listed firms as having operations core to national security, making them targets for stringent regulations, a list released by the Ministry of Finance (MOF) showed.
The tighter rules covering foreign investment in a dozen sectors crucial to national security, such as oil, railways, utilities, arms, space, nuclear power, aviation, telecoms and cyber security, take effect from Friday.
Foreign investors buying a stake of 1% or more in Japanese firms in the 12 areas now face pre-screening in principle, compared with the previous threshold of 10%.
"The revised law is aimed at accelerating foreign direct investment in Japan," said Finance Minister Taro Aso, referring to a law passed in November, and adding that technology and patents needed protection from a national security standpoint.
"As we have explained our intention overseas, misdirected criticism such as that we may limit foreign investment in Japan has disappeared."
Some analysts say the revised law reflects Tokyo's concern over China's growing influence in industries such as defence, running the risk of leaks of confidential information and outflows of key technology.
However, critics have argued the regulation discourages foreign investors in Japan's stock market, and runs counter to government efforts to lure investment to revitalise the economy.
Exemptions to allay such concerns include investment without pre-screening by foreign financial institutions, and the waiver of pre-reporting requirements for certified sovereign wealth funds and other investors who meet certain criteria.
Foreign investors have a huge influence on share prices as they own about 30% of Japan's roughly 575-trillion-yen stock market, and make up about 60% of trading turnover.
For a complete list, open the file on the MOF website:
here (Reporting by Tetsushi Kajimoto; Editing by Jacqueline Wong and Clarence Fernandez)