TOKYO  The Japanese government said on Wednesday that it would block a British hedge fund from buying a larger stake in a power company, in a case that is being closely watched as a test of Japan’s openness to foreign capital.

The trade ministry rejected a proposal by the hedge fund, the Children’s Investment Fund, to increase its holdings in Electric Power Development, an electricity wholesale company, to as much as 20 percent from 9.9 percent. The ministry was acting on the recommendation of a government-sponsored panel, which said the fund’s short-term profit horizon could hurt the company’s ability to provide electricity.

The rejection is the latest in a series of setbacks for foreign investors in Japan that have raised questions about the country’s commitment to welcoming foreign investment and business. Recently, Japan has appeared adrift in economic policy, seeming to waver between embracing the global economy, and erecting barriers to keep it out.

Japanese officials have insisted that the country remains open. They said that the electric company, commonly known as J-Power, was an exception because of its strategic role in supplying energy to Japanese homes and businesses. In its recommendation, the committee expressed concerns about the possibility of foreign investors getting access to sensitive technology used by the company, which operates nuclear power plants.