Zaikei Account

[futureplanner]

Hello,

My employer uses a Defined Contribution plan for pension. In addition, they allow employees to open a Zaikei account through Mizuho (https://www.mizuhobank.co.jp/retail/pro ... index.html)

My understanding is there are 3 options for accounts:
1) General use (no tax breaks)
2) Save for retirement (tax deductible)
3) Save for house (tax deductible)

I have not seen very much information available online in relation to this type of savings options. As I am a US citizen, I have limited options as far as investing here in Japan goes. (As this community helped me learn, so thank you for all the great information). I don't think general use or retirement options would be very appealing since I can do better things with the money (such as send back to the US to invest)

The option that I could see potentially being useful is the saving for house option, as that is something I might consider doing in the next 5 years (my plan is to stay in Japan through retirement. I have a little over 30 years left until retirement for reference). My Japanese is still pretty limited and I could not glean what sort of interest rate they promise on the funds, but I expect it isn't much. The taxable income deduction would probably put me down into the 20% tax bracket, but I can't imagine I would be able to dip below that. So would be looking at a max of 3% tax savings there. I couldn't glean enough information from the Mizuho site in Japanese to do real math on what sort of interest the account would earn.

Could it potentially be a better option for me just to take the cash that I would be saving for a house down payment and send it back to the US to invest in a brokerage account (potentially a bonds market fund, or perhaps even just a typical bank CD ladder for safety). It would hurt to eat the round trip transfer funds, but the returns over 5 years might make it worth it? Does this graph outline the situation?





Does anyone have any experience with these types of accounts? I will be sending at least the maximum Roth-IRA contribution back to the US, however I am very open to suggestions on the best course of action for investing the remaining yen that I earn. (I don't necessarily want to purchase a house here, I would be perfectly ok with just renting and elsewhere investing the funds that would have been used for purchasing a house)

[tbsmj]

You should expect the return on such an account to be essentially indistinguishable from zero (think interest rates of a few base points, i.e. hundredths of a percentage point). In fact, it's not unlikely that your entire profit could be eaten away by just the wire transfer fee from Mizuho to your own bank when you withdraw the funds at the end (speaking from experience!).

If you are planning to spend Japanese yen, however, keep in mind that a US money market fund or CD exposes you to currency risk potentially exceeding the upside. Of course other investment options have their own issues as well (with an investment horizon of 5 years, stocks look rather risky at the moment, and the low interest rate environment doesn't make bonds particularly attractive either).

[futureplanner]

Thanks for sharing your experience tbsmj. I think I will just avoid the Zaikei. I'll probably save up an emergency fund in Japanese yen then look to invest with my US accounts in years to come. I'm sure I will benefit greatly from a sit down with a tax attorney / accountant in the near future