A Japanese court on Thursday cleared the way for Bull-Dog Sauce to block a takeover attempt by Steel Partners, a US hedge fund, by approving a rights issue by the condiment maker that would reduce the fund’s stake from 10.5 to less than 3 per cent.

The ruling could scare off other foreign investors in Japan, according to lawyers and financial industry executives, by sending a message to activist funds that companies can discriminate against unwelcome shareholders.