The Children's Investment Fund (TCI) lodged a last-minute appeal against the government Monday, saying its efforts to block the U.K. fund's bid to buy more of Electric Power Development Co. damage the growth and reputation of Japan's capital market.

The government's recommendation in late April that TCI should halt its bid to increase its stake in J-Power "is damaging Japan's reputation as an open capital market," TCI said in a statement. "It has provoked strong reactions from Japanese and international investment communities."

The government is expected to issue a formal withdrawal order for TCI on Wednesday.

The government's moves are based on "erroneous facts, flawed economic reasoning and misinterpretations of law," the $10 billion hedge fund said.

TCI sent a letter to the government on Thursday, the deadline for TCI to explain its refusal of the government's recommendation. The letter apparently failed to convince the government to change its mind.

In the April recommendation, TCI was advised to drop its plan to double its 9.9 percent stake in J-Power to around 20 percent.

By law, foreign investors need approval before taking more than a 10 percent stake in a Japanese company engaged in work deemed critical to national security.

The TCI case is the first such rejection under the Foreign Exchange and Foreign Trade Control Law.