Reader Profile: MJC

Last week I received an email from MJC, who told me he was planning to leave Japan and had a few questions. I suggested our readership might be able to answer them better than I could, so he kindly agreed to submit a Reader Profile.

MJC has quite the incredible story (the Apple shares!) and some very pertinent questions at the end.

1. Tell us a bit about yourself.

I am 53 and living in Japan for about 30 years. I am from Ireland and spent a year in Australia in 1985-6 on a working holiday visa. I came to Japan in 1986 and have been teaching English since shortly after arriving, at language schools, Junior/Senior high schools and now again a language school in Tokyo. I am single, so have had no childrearing expenses.

One big reason for posting here is that I am seeking information/advice from you and your readers (many heads being better than one) and am sharing my (not so interesting) story in the hope of generating some comment about my questions.

One point to add. Yes, I live in Japan since the Jurassic period so I should speak, read and write Japanese fluently. I can speak, but I do not read much. Not having a Japanese partner who can wade though documents and fill out forms, I try to deal with paperwork as little as I can. This means that when I have something up and running I tend to let it be. Another reason is sheer laziness.

2. How did you get started with personal finance?

Neither of my parents invested in markets or property but I came of age in the 1980s when Maggie, Ronnie and Milton Friedman were telling all of us to be entrepreneurs or, at least, not to depend on the state so much. The newspapers were full of business news, privatisations and so on. When I was in high school I took out a saving plan with a life assurance company back home which did not mature until I was in my 40s.

From my second or third pay check in Japan I would have started saving as much as I could spare. I first lived in a small apartment and only bought one or two items per month. I had no phone for 2 or 3 years but depended on the various colours of NTT public phones. When you are in your early 20s it is ok to have one futon, one cushion, 2 cups, 2 spoons etc. I have never had the attitude of buying before saving. Probably 90-95% of my monthly pay checks would have generated some savings. I have paid 99% of my credit card bills when they were due one month later. I guess this attitude came from a strong desire to be independent and not be a burden on anyone.

My first foray into investing in Japan was dabbling in FOREX accounts at Citibank. I was never wise enough to see the big picture and probably did not get out of it until after Mr. Soros roasted Sterling in 1992 and roasted me too. Then in 1996 I met a person whom I wanted to stay in Japan for and decided to buy an apartment. I thought it would be a home and an investment. Why did I decide to do that?

One reason was my growing intolerance for the no-foreigners-wanted-here-at-this-property , must-pay-gift-money-and-renewal-fees.

The second reason is that other countries had suffered property crashes before but began to recover after a while and living in the world’s biggest city made me feel sure that by 1996 the Japanese bubble had crashed far enough to warrant buying at a good price. I paid ¥17m for a 50m2 manshon that someone had bought new 10 years previously for ¥40m. My down payment was about 3.5m so I only borrowed 13.5m. It was 7 minutes from a suburban station in N.E. Tokyo. I was able to buy a bigger and nicer place than I could rent for less money and that helped to push me towards buying. To jump ahead, I finally sold it in 2013 for ¥9m after getting cold feet about the impact a 2011 Tohoku-level earthquake would have on Tokyo and my apartment. I did not want to be asked to stump up millions of yen to repair/rebuild it especially when the residents were aging and quite likely not want to pay such money. This has made me into a renter again, but now I will only rent from UR which are foreigner friendly, no gift money, no renewal fees and fair estimation of wear and tear when you do move out. I can’t recommend UR enough.

Several advantages cascaded from buying the apartment. I felt settled here. This led to a desire to invest (if others could do it, why not me?). The internet bubble was heating up in the late 1990s. I walked into a broker near my school and opened an account. They said I was their first foreign customer at that branch. I had to get a hanko made, pretend I could read the 30 or 40 pages of legal disclaimers written in Japanese (they did not care, just asked me if I understood the risks and when I said yes, told me where to put my seal). First, I bought Apple stocks (then listed on TSE) for, I think, around 3,000 yen each and sold when I was up 40 or 50%. I put the money into other stocks and made more money and then lost money in 2000 and 2001 when the bubble crashed. Little did I know. My 1,000 (or maybe a few hundred more, I can’t remember) Apple stocks (yes, I spent several million yen on my first venture!) would now be worth several million US$ because Apple split 1:2, 1:2 and 1:7 since then !! Buy and hold did not seem appealing when I was making money for the first time in my life. And Apple was at death’s door more often than not in the late 90s. So when they jumped, I got out. I should have been knocked down in an accident, been in a coma since 1997 and woken up recently. I would be ridiculously rich now. C’est la vie.

3. What are you doing at the moment?

Since the early 2000s I have been a buy and hold person. At first this was dictated by the desire to stop selling in panics and when the market was down. Hold was not a deliberate strategy but a way of waiting until better times. I then got the confidence to invest more and average my prices down. I now own a few Japanese blue chips and a few more speculative stocks that I have held for going on 17 or 18 years. My dividends after 20% tax pay me equivalent of a 13th month’s salary.

Why have I never used funds?  It comes from a desire to not need to talk to sales people. Yes, I know everything is done on the internet now, but when I walked into the stock broker in 1997 Tokyo was still full of such branches with 10s of TVs showing prices and old men watching them on sofas. I only buy occasionally over the phone and, as I said earlier, to avoid dealing with more documentation, I have not set up new accounts to make internet investing or trading easier. Should I change? Yes. But, if I were good at all the things I am not good at, I would be a different person !

4. What books/websites/companies do you recommend?

I have always been a strong saver and never really read books about HOW to invest or get rich. I have been more of a reader of history and such. One book which I read twice but never deeply understood was the 1998 ‘The Education of a Speculator’ by the trader Victor Niederhoffer and his follow up, ‘Practical Speculator’.

The only things I strongly recommend to younger people (in particular) are the following:

(a). Work hard. Before you can invest at all, you need to make money and working hard is the best way. A lot of people come to Japan and say wages are bad (and they are) and costs can be high (and they can be) but when many of those people have a chance to work more, they don’t. I have always seized chances to make hay while the sun has been shining. And yet, people may think I lead a funless life. Not true. I have travelled a lot, visit family once a year, enjoy good food, buy books I want to buy and live in a convenient location.

(b). Even if you start at the bottom, don’t relax there. Improve your skills, learn new things, read the
news and make yourself useful or indispensable to managers and customers. If, like many others here in Japan, you teach English, take courses to get some TESOL qualifications, offer to proofread papers for others, be flexible, friendly and not too weird and you may get more work, make more money and have a better life. ​

(c). Don’t live too far above your ability to pay. When renting, I have always rented as modestly as I can. A lot of money can disappear by renting nice places at nice addresses, but then there is little room to save. I have gone the opposite route, living slightly down-er market than my salary warranted but saving the difference.

(d) In line with what I realised many years ago listening to Maggie and Ronnie, companies will take more and labor remuneration is going to be (has been for 30 years) pushed down. So, you NEED to invest because your lower salary is enabling higher profits and in order to grab a share of those profits (swollen by your lower wages, don’t forget) you must buy into the market to earn dividends and make capital gains. 

5. What’s your plan going forward?

This is why I am writing. I have 4 main questions that I hope readers can weigh in on. Finding myself single again recently and with a sibling facing long term health issues, I am thinking of re-locating back to Ireland. I am also afraid of Japan Sovereign Risk with the Yen tanking and waking up one day Yen-rich but Euro-impoverished.

Q1. I have paid into Kokumin Nenkin from around 1997 to 2011 and since then I have been paying into Shakai Hoken. Basically I am counting on my pension being Zero when sent overseas (the Yen collapsing like I mentioned above). In that case, would you and others recommend cashing in the pension when I do leave and taking the 3 years maximum minus 20% tax? Is there any point in waiting to receive what will turn out to be a modest amount? Opinions, please.

Q2. When is a good time to sell stocks that are up? If the value has doubled even after paying 20% capital gains tax, is that a good time to sell? I have become so stuck into buying (and sold nothing for 14 years) I have become frozen in how to decide when is a good time to sell. Any ideas? When my stocks go up, the Yen weakens so I tend not to be ahead when converting to Euros.

Q3. Can someone explain about the so called Exit Tax? If I realise all my assets here and pay the 20% capital gains tax, then the amount of money left over is all mine, right? My understanding is that the Exit Tax must be paid on NON-CASH assets with unrealised gains. Is that correct?

Q4. Japan has changed the law regarding Inheritance Tax. My understanding is that the long arm of the Japanese Tax Office now wants to dip into our pockets for several years AFTER we leave Japan (and cancel Permanent Residency) if we inherit assets overseas. This seems so outlandish as to be untrue. Have I got it completely wrong? If not, what implications do any readers see?
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Any other thoughts?

None other than to wish everyone health first and wealth second. And thanks for any advice I receive.

RJ: Wow, MJC, that is pretty incredible. You seem to have stumbled into good financial habits without all the reading and fretting I do -congratulations!

I completely agree with your conclusion about the need to invest in order to benefit in the economy. Particularly with automation speeding towards us, I believe the value of labour is going to continue to fall. If you are a worker, you pretty much have to invest and own the means of production if you are going to maintain your standard of living in the future.

Your story and questions will be pertinent for a lot of our readers -just how do things work when you leave Japan? What should we be thinking about and planning for?

Let me give you my really quick impressions regarding your questions, then we can hope that wiser heads will weigh in in the comments:

Q1: So you have paid into Kokumin Nenkin for 20 years, and as of this month you only need ten years to vest and be paid a pension. The pension would be paid for the rest of your life and can be claimed overseas. Giving that up for a one-time payment that would be around the same amount you would receive each year as a pension seems madness to me, regardless of possible future uncertainty about the yen.

Q2: I can’t really help you here, as I too plan to buy and never sell. I’m planning to live off dividends in the future. I imagine that the time to sell shares is when you need the money. However, I have a question of my own: can you transfer the shares to a broker in Ireland without selling them and paying capital gains tax?

Q3. I believe you are correct about the exit tax (which if you have more than 100 million yen’s worth of shares may invalidate my answer above).

Q4. The new inheritance tax rules seem a bit crazy for foreign nationals leaving Japan permanently. I suspect that is not the intent of the rules and that they will not (cannot?) be enforced on non-nationals who don’t intend to return to Japan. The new laws were written specifically to deal with extremely wealthy Japanese nationals who were using a loophole to evade taxes.

What does everyone else think? Any advice for MJC? Are my answers okay? Is there anything we’re missing?

Also, I would love to run more Reader Profile posts. They are one of my favourite parts of the site. If you would be willing to answer the same questions and be featured on the blog, please get in touch through the site or drop me an email at info@retirejapan.info