TOKYO (Reuters) - Japan's government said on Wedneseday it would investigate messaging app Line, owned by SoftBank Corp's Z Holdings Corp, after Japanese media reports that it let Chinese engineers at a Shanghai affiliate access Japanese users' data without informing them.
Under Japanese privacy regulations, companies have to let users know when their personal data is sent overseas, public broadcaster pubic broadcaster NHK and other local media reported earlier.
"We can't say yet if Line breached regulations or not, and we are conducting an investigation to find out," a government official responsible for overseeing privacy regulations told Reuters. If Line is found to have acted improperly then the Cabinet Office can direct it to make improvements, he added.
"There hasn't been anything that breached legal or regulatory boundaries," a spokesman for Line said." We will continue to respond to laws and regulations in all jurisdictions, including Japan."
In a statement posted later on its website, the company apologized for causing any concern and for not adequately explaining policies regarding data management to users. No inappropriate access occurred, it added.
Four engineers at a company in China, who perform system maintenance for Line, were allowed to access servers in Japan from 2018 that contained the names, telephone numbers and e-mail addresses of users, local media said.
The reports come as Japan tightens laws and regulation around the use and storage of personal data held by internet companies.
Line, which has 186 million users worldwide - of which just under half are in Japan - has since blocked access to user data at the Chinese affiliate, the company spokesman said.
Line this month became part of Z Holdings, formerly Yahoo (NASDAQ:AABA) Japan, creating a $30 billion domestic internet heavyweight to compete against local and U.S. rivals.
Messages sent via Line can only be read by the sender and receiver as the app, like other messaging apps, encrypts message content end to end.
Z Holdings is controlled by SoftBank Corp through holding company A Holdings, which is jointly owned by SoftBank Corp and South Korea's Naver Corp, the former operator of Line.
Z Holdings, which plans to invest 500 billion yen ($4.58 billion) in technology over the next five years, announced the Line tie-up last year but was forced to delay the move from October because of the COVID-19 pandemic.
Line has expanded its business into cashless payment and more recently telemedicine.
Shares of Z Holdings, which also controls fashion retailer Zozo Inc and office supplies firm Askul Corp, dipped 1.1% to 611 yen, compared with the Tokyo exchange's TOPIX index which was flat.
($1 = 109.1500 yen)