RetireJapan

Asked question in Simple Q&A thread, some time ago. About sending cash without buying anything to Monex iDeco. Whether it's ok, and can it be tax-deducted.
Today my wife (actually its her iDeco) called Monex to confirm some things and among others was told that if she transfers cash, and does not buy anything - then after 3 months and 2 weeks Monex will buy something on her behalf.
Is that true? If yes - every broker does so, or only Monex? I haven't seen this info here (maybe missed), therefore thought it might be important enough to start a new post.
Any way to bypass this forced purchase by Monex?
There's a chance that Monex staff was wrong though, but sounds possible. Otherwise it's just like tax-free bank account, too good to be true imo...

You need to buy something. The recommendation for you was to buy a savings fund which is basically a fund to park your money in that earns almost nothing. Monex will not hold your money for you because they are not a bank.

Each bank and broker may have their own policy. The default tends to be a term deposit.

The rules are a bit different because ideco accounts after handled by the broker/bank via JIS&T.

I am willing to bet this is mizuho term deposit is their default.

https://mst.monex.co.jp/mst/servlet/ITS ... BrandList

みずほDC定期預金（1年）
商品番号：022

Obviously, NISA requires you to buy something, and you cannot switch. When you sell you take the profits tax free, but that is the end for that NISA contract...

iDECO on the other hand requires you to buy something, but it allows you to switch products within the iDECO as many times as you like without any Tax Liability.

Every iDECO provider should have a Cash Equivalent instrument.

Monex has the 元本確保型商品 - 定期預金 - みずほDC定期預金（1年） - Principle Protected Mizuho DC Time Deposit
https://mst.monex.co.jp/pc/pdfroot/publ ... kin_DC.pdf

If this is indeed what you want to do, you should buy this Myokin_DC just to park the funds, which is equivalent to keeping the money in cash in the account with a Japanese Interest Rate (currently 0.002%), and when you are ready, sell these units and purchase units of the instrument you want to buy. Switching will take several business days to liquidate the units and then purchase the new units, but there is no tax penalty, as the funds remain in the iDECO.

To do this, you would set the Allocation of your Monthly Contributions to 100% Myokin_DC. The cash will automatically be parked in these units.

When you decide to change, you would then sell the accumulated units and buy the equivalent cash value of the units of the other funds you want to buy.

When you are comfortable changing the Allocation of your Monthly Contributions, you can do so at any time in time for the next month's contributions, and change from 100% Myokin_DC to whatever allocation you like across whatever funds you like...


There are different opinions on this forum, but if you set a different allocation, you will then be Dollar Cost Averaging into those other units over time; as prices go down, buying more units, and as prices go up, buying less units for the same contribution every month, leading to a low Average Price per Unit overall over time. (You can just set it and forget it.)

I, personally, am currently buying Japanese Equity and REIT Funds with my new contributions to avoid what I perceive to be a high Forex Risk, whilst I have a pot of 'Dry Powder' in my iDECO provider's Cash Equivalent from the end of last year, and I plan to switch out of Cash and Japanese Assets and into Global Equity and REIT Funds (and maybe even Global Bond funds with such high Yields...), when I am more sure of the direction of Global Interest rates and Exchange Rates.

Others are continuing to buy Global Equity Funds; The eMaxis Slim Global Equity Index - All Countries Fund or equivalent Low Management Fee Global Equity Index Fund through thick and thin, and ignoring the Global Interest rates and Exchange Rates.

HeavyMetal wrote: ↑Fri Nov 04, 2022 12:10 pm Otherwise it's just like tax-free bank account, too good to be true imo...

A tax-free bank account in Japan saves one a few yen every now and then, I guess… I would take it, but there are better things to do with limited tax-free investment accounts imo!

Thanks a lot for replies!!! And especially details, really helpful.

Yes I might have misunderstood about buying some savings fund, thought I'd just transfer cash and that's it
(Not going to keep cash all the time but I don't like how Nikkei looks now and US funds are not the option now either)

One question about that Monex' 元本確保型商品 - 定期預金 - みずほDC定期預金（1年）
What does that（1年）at the end means? Only available for one year? After that - what happens?

It's the bank's 1 Year Fixed Rate. They have different Interest rates depending on how long you want to tie the money up for (The Bank that is) and the Fund applies that Interest Rate.

However, as this is not the Bank, you don't actually have to lock the money in for that period of time. You can buy and sell units in the Fund whenever you like.