Japanese NISA Accounts

Japan is to revise its tax exemption system for the NISA (Nippon Individual Savings Account), starting January 2024. NISA investments are exempt from tax normally levied on capital gains and dividends, and maybe useful additions to a diversified long-term portfolio.

The NISA account is designed for individuals to self-select and manage a portfolio of funds or stocks, with a tax advantage to entice the piles of cash sitting in Japanese bank and post office accounts, as well as from under the futon!
 
Under the new NISA system, the Tsumitate NISA (for regular monthly contributions invested mostly in mutual funds), the maximum annual investment will increase from the current ¥400,000 to ¥1,200,000.

In addition, the General NISA which accepts ad-hoc lump sums (5 years tax exempt) will be replaced by a so-called 'growth investment framework' that will include listed stocks. It will be available alongside the Tsumitate, and the maximum annual contribution will be increased from ¥1.2 million to ¥2.4 million.

The lifetime tax exemption limit will be raised to ¥18 million of contributions, of which up to ¥12 million can be applied to the growth investment framework. The current 5-year limit on the tax exemption on capital gains will be abolished under the new system, with no limit. 
 
The new NISA accounts may be an option for regular savers planning to stay in Japan for the long term (10+ years). To the best of our knowledge, these accounts are only offered in the Japanese language, so we urge you to make sure you fully understand the terms and conditions when signing up. Another point to bear in mind is that you may be forced to sell your NISA investments when leaving Japan permanently, and that may be at an inopportune time in the stock market cycle.

In summary, a potentially useful complement to your portfolio of diversified assets due to the tax freedom on any capital gains and dividends. However, like any risk-based asset, the value of a NISA can fall as well as rise, and you may not get back the money you invested. The language barrier can be an issue for some, and an untimely departure from Japan may have an effect on what you ultimately get back.

AP Advisers Ltd does not give advice on the merits or otherwise of NISA investments and their underlying assets. Advice should be sought from the issuers of NISA products.