Invest Smart in Japan: NISA Essentials for Residents

Japan’s revamped NISA (Nippon Individual Savings Account) system, relaunched in Jan. 2024, makes it easier than ever to invest and grow your wealth completely tax-free. Whether you’re a Japanese citizen or an expat living in Japan, you can now invest substantial amounts without paying tax on dividends or capital gains. This guide will cover how NISA works, who qualifies, and how to get started.

What Is NISA?

NISA is Japan’s answer to systems such as the UK’s ISA or the US Roth IRA. It is a government-approved system that encourages long-term investing by eliminating taxes on your investment gains and dividends within specific limits. The goal is to help residents grow their money through investments, rather than just saving in low-interest bank accounts.

What Changed in the NISA Reform for 2024?

The Financial Services Agency (FSA) merged the old General NISA and Tsumitate NISA into a single, permanent system. This new system features two quotas and, crucially, allows you to use both quotas at once.

What Are the NISA 2024 Investment Quotas and Limits?

The new system allows residents to invest up to ¥3.6 million per year tax-free by combining the two main quotas.

Investment Quotas Explained:

The Tsumitate NISA Quota has an annual limit of ¥1.2 million, which is approximately ¥100,000 per month. This quota is best for beginners and long-term savers, allowing for automated monthly investing into long-term diversified mutual funds approved by the FSA.

The Growth NISA Quota has a higher annual limit of ¥2.4 million, or approximately ¥200,000 per month. This quota is designed for active investors and those seeking higher returns, as it allows investment in listed stocks, ETFs (Exchange-traded fund) and REITs (Real Estate Investment Trusts).

Lifetime Limits:

The Total Lifetime Limit for NISA is ¥18 million, and the new system is permanent with no expiration period. Out of this total, a maximum of ¥12 million can be allocated to the Growth quota (stocks, ETFs, REITs, etc.). The remaining portion (¥6 million or more) can go into long-term mutual funds under the Tsumitate quota.

Why Should Japanese Residents Invest with NISA?

Over half of Japan’s household wealth remains in cash deposits. With inflation rising and interest rates still near zero, the new NISA is the government’s direct method of encouraging citizens and residents to shift from saving to investing.

The benefits are substantial:

• Accessible to Expats: Foreign residents with a valid visa and a My Number enjoy the same rights as Japanese citizens.
• Tax-free for Life: You pay zero capital gains or dividend tax as long as your money stays in NISA.
• Permanent: The old system’s 5–20 year expiry has been completely removed.
• Reinvest Anytime: You can sell assets and immediately reuse the same quota based on their purchase value, without losing your lifetime limit.

What are the Essential NISA Rules (Especially for Foreign Residents)?

Navigating NISA is straightforward, but there are a few critical rules, especially for those new to Japan or planning to move:

1. You can only open one NISA account, so choosing your financial institution wisely is essential.
2. Non-residents cannot open or continue a NISA; if you move abroad, your account will be suspended or converted to a taxable one.
3. Unused annual limits do not roll over to the next year.
4. Losses within your NISA cannot offset gains in other taxable accounts.
5. Foreign ETFs/stocks may still face withholding taxes overseas (e.g., US ETFs).
6. You will need to manage your investment on your own, so be sure you understand what you are doing.

Which NISA Broker is Best for Foreign Residents?

Securities brokerages (not banks) are registered under Japan’s FSA and are where you actually open and manage your NISA account. They typically offer stocks, ETFs, REITs and often lower fees compared to banks, which usually limit you to mutual funds.

Popular Brokerages for Expats:

• Rakuten Securities: This platform is highly recommended for its English-friendly interface. It is easy to open if you use Rakuten Bank and supports both the Tsumitate and Growth quotas.
• State Ban of India (SBI) Securities: Popular with expats, SBI offers a wide range of investment options, low fees and an English guidance page.
• Monex Securities: This firm is notable for offering access to US ETFs and features a user-friendly interface with good educational content.

Other options include MUFG Bank NISA for simplicity, although it has a limited product range and LINE Securities for app-based investing, ideal for casual investors making small monthly deposits.

FAQs

• Who can open a NISA account? Anyone 18 years or older who lives in Japan and holds a My Number card can open one via a bank or brokerage.
• Can foreigners use NISA? Yes. As long as you’re a tax resident in Japan, you’re fully eligible.
• What happens if I leave Japan? If you become a non-resident, your NISA will be suspended or converted into a taxable account.
• Can I withdraw anytime? Yes. You can sell your investments anytime, and your lifetime limit resets based on the amount sold.

Your Next Step: Start Investing Tax-Free 

The 2024 NISA reform is a powerful, permanent tool designed to move your money out of low-interest savings and into the market, completely tax-free. By utilizing your annual ¥3.6 million limit, you can build substantial, protected wealth over the long term, with zero tax on dividends or capital gains.Ready to start investing smarter in Japan? Don’t miss out on the latest essential financial updates, exclusive guides and insights for residents and expats. Subscribe to GoConnect’s newsletter today to stay informed and ensure you’re maximizing your NISA benefits and all your financial opportunities in Japan.

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This information is for general purposes only. GoConnect accepts no liability for any investment decisions made on the basis of this article.