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Japan Tightens Oversight on LINE Yahoo after Data Breaches

Source: Softbank

Tokyo, Japan - Japan's government has taken a firm stance against LINE Yahoo, a messaging and internet services company, following data security breaches. 

The interventions by the Ministry of Internal Affairs and Communications (MIC) and the Personal Information Protection Commission (PPC) underscore growing concerns about the company's data governance practices.

The catalyst was a data leak in November 2023 that affected over half a million users. 

The leak was traced to a malware-infected computer at Naver Cloud’s maintenance subcontractor. 

Compounding the issue, an internal investigation in February 2024 revealed unauthorized access to tens of thousands of employee records.

LINE Yahoo has since initiated remedial measures, including decoupling its authentication systems from Naver, bolstering security, and severing unnecessary network connections. 

The company has earmarked ¥150 billion to terminate most outsourcing to Naver by July 2024, with a target completion date of March 2025.

However, the authorities' concerns extend beyond technical fixes. 

In a striking move, MIC urged LINE Yahoo to reassess its capital relationship with parent company Z Holdings to ensure independent vendor management. 

While discussions between Naver and SoftBank are ongoing, concrete decisions have yet to emerge.

Moreover, LINE Yahoo has overhauled its board, appointing a 67% majority of external directors and removing its CPO with the background of South Korean nationality and Japanese nationality CSO from board roles. 

Although framed as a bid for objectivity, some analysts have raised eyebrows at the board's apparent lack of internet industry expertise and strategic insight.

As a widely used service in Japan, even among government agencies, LINE Yahoo's tribulations have stoked broader anxieties about data sovereignty. 

Compared to more measured directives issued to Google over anti-competitive practices, the authorities' muscular response may signal heightened scrutiny for foreign players in Japan's digital landscape. 

This development could sit uneasily with the government's ambitions to position the country as a global startup hub.