One prominent activist hedge fund manager is threatening to transform Japan’s reluctance to allow it a larger stake in the country’s largest electric utility into an international incident.

Christopher Hohn of The Children’s Investment Fund has written to the European Union’s trade commissioner asking him to punish Japan for the “violation of free trade and investment between Europe and Japan.”

Hohn told Peter Mandelson, the one-time British cabinet minister and confident of former Prime Minister Tony Blair, that Europe must impose sanctions on Japan in the interests of free trade should Japan’s government reject its bid to double its stake in Electric Power Development Co., known as J-Power, to 20%. Japan’s Ministry of Economy, Trade and Industry last month postponed a decision on TCI’s request until May.

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