China’s ZTE will effectively be denied official government contracts in Japan under new rules. Numerous countries, including the United States, have already made similar rules affecting Huawei and ZTE over concerns about security. (Jason Lee/Reuters)

Japan’s government issued instructions Monday effectively banning China’s Huawei and ZTE from official contracts, while the country’s top three telecom operators plan to follow suit, Japanese media reported Monday.

The news is another setback for Huawei after its chief financial officer was controversially arrested in Canada at the behest of the U.S. government for allegedly trying to evade U.S. sanctions on Iran.

Japan’s government guidelines are designed to prevent leaks of sensitive information and do not mention the Chinese companies by name, the Nikkei newspaper reported.

Earlier this year, the U.S. Congress passed a law that will largely ban Huawei and ZTE from use by the U.S. government and contractors. Nikkei reported that Washington had given Tokyo information about the security risks involved in using Chinese-made equipment.

Australia and New Zealand have also blocked Huawei from building fifth-generation (5G) networks because of concerns over its possible links to the Chinese government.

The Japanese ban will cover purchases of personal computers, servers and telecommunications equipment by the government and Self-Defense Forces over concerns that viruses embedded in the equipment could cause systems to fail or could leak sensitive information, including military operations, to China, Nikkei reported.

But Prime Minister Shinzo Abe said the new rules were not targeting any particular company.

“In order to secure cybersecurity, we are aware that it is extremely important to make sure we would not procure equipment with functions of malicious intention,” he told a news conference Monday.

“Accordingly those ministries and agencies related to this issue met today to ensure cybersecurity related to IT procurement within the government,” he said. “The purpose is to stipulate at each ministry and agency what system and procurement procedures should be protected, and it is not to eliminate specific companies or equipment.” 

Japan’s relations with China have been improving in recent years, and Abe visited China in October vowing to take their relationship in a “new historic direction.”

But the controversy about Huawei could become an irritant.

In response to the announcement, Chinese Foreign Ministry spokesman Lu Kang maintained that Chinese investment in Japan is on a “win-win” basis and warned against “discriminatory treatment” of its companies.

“We have also been asking the Japanese side to provide a fair, transparent and nondiscriminatory environment for Chinese companies’ operation and development in Japan,” he said Monday. “China will pay close attention to the implementation of relevant regulations of the Japanese side.”

Earlier, the Chinese Embassy in Japan also posted a statement on its website Friday saying there is “no evidence that Huawei and ZTE products have security risks.”

Kyodo News reported that Japan’s big three telecom operators, NTT Docomo, KDDI and SoftBank, also planned to follow the government’s lead by not using equipment from the two Chinese companies in their current networks and upcoming 5G gear. But the three companies told the Reuters news agency they had not made any decisions yet.

While Docomo and KDDI use little or no equipment from the two Chinese companies, SoftBank does use Huawei equipment in its network, and the Japanese company’s shares fell 3.5 percent Monday on concerns this would be hard to replace.

Huawei has two research and development centers in Japan, attracts Japanese graduates by offering large salaries and procures supplies worth more than $4.3 billion from Japan, Nikkei reported, arguing Japan is not immune from Huawei’s woes.

Anna Fifield in Beijing contributed to this report.