Japan University Fund Lifts Defense Investment Ban, Removes 50% Revenue Rule

The university fund under the jurisdiction of the Ministry of Education, Culture, Sports, Science and Technology has relaxed its investment restrictions on defense-related companies. Previously, companies deriving more than 50% of their revenue from the manufacture and sale of weapons were excluded from investment targets; such companies will now be permitted in principle. The Japan Science and Technology Agency (JST) decided on this policy change in June, citing improved international assessments of the defense industry.

The university fund was established to strengthen Japan's university research capabilities, with a scale of 10 trillion yen. It invests in bonds and growth industries and distributes the investment returns to International Research Excellence Universities that aim for the world's highest research standards.

Tohoku University was certified in November 2024, Institute of Science Tokyo in January 2026, and Kyoto University at the end of July. From an ESG (environmental, social and governance) perspective, Europe and other regions typically exclude the defense industry from investment targets. However, since Russia's invasion of Ukraine, the defense industry has been reassessed as an indispensable pillar of national security, and the trend toward adjusting international investment policies has expanded. JST's decision to lift the restrictions is also consistent with ESG judgments. Companies involved with inhumane weapons prohibited by international treaties will continue to be excluded.

The Development Bank of Japan also lifted its investment and financing restrictions on the defense industry in May. Nagoya University adopted a Peace Charter in 1987, declaring that it would not conduct research or education for war purposes and would not accept research funding from military-related institutions. That university is also applying for International Research Excellence University status.