The Nippon ISA (NISA) allows people living in Japan to invest in the stock market without paying tax on their capital gains or dividends. Modeled on the British ISA (individual savings account), NISA is designed to encourage individuals in Japan to invest in the stock markets. A NISA account can be opened at many financial institutions, including most banks and online brokers. NISA accounts offer a tax wrapper for stocks and funds, meaning that while investments are held all dividends and capital gains are tax-free.
Who is NISA for?
NISA accounts are particularly beneficial if you’re…
- already investing in the stock market,
- not eligible for an iDeCo account,
- not planning to stay in Japan until retirement,
- or just wishing to invest more than the iDeCo limit.
Benefits of NISA Accounts
Any investments in a NISA account can grow completely tax free. There is no longer a tax-free duration.
New NISA System (from 2024)
The New NISA started in January 2024. It is a completely new system and is not connected to previous NISA accounts. Any legacy NISA years will continue to be tax free until they reach the end of their tax free period (5 years or 20 years, for ordinary or tsumitate NISA respectively).
In the new NISA system, there are two sections to the accounts: a tsumitate section (つみたて投資枠) and a growth section (成長投資枠). The tsumitate section only allows you to buy mutual funds, and in principle must be filled with a regular monthly payment. There are ways to invest a lump sum or to fill your account at the end of the year, but this is not in any way necessary. The growth section allows you to buy stocks, ETFs, and mutual funds, and you can use any combination of spot (one off) purchases and regular payments to fill it.
The tsumitate section has an annual contribution limit of 1.2 million yen, and a lifetime contribution limit of 6 million yen. The growth section has an annual contribution limit of 2.4 million yen, and a lifetime contribution limit of 12 million yen. Both sections can be used, or just one.
The existing limit on the tax exemption period for capital gains was removed in the new system, meaning there will be no limit – great news! This change reflects the increasing need, considering longer lifespans, to prepare for retirement through long-term asset management.
2024 NISA Highlights
- Indefinite tax-exempt holding period.
- The tsumitate and “growth” investment limits can be combined.
- The annual combined investment limit has been increased to ¥3.6 million:
- Tsumitate framework: ¥1.2 million per year
- Growth framework: ¥2.4 million per year
- The lifetime combined investment limit has been increased to ¥18 million. (The growth investment limit is ¥12 million. These limits can be reused.)
- No Junior NISA
Comparison of the 2023 and 2024 NISA Systems
| 2023 NISA | 2024 NISA | |
|---|---|---|
| Eligible Investments | Tsumitate: Mutual funds suitable for long-term investment Ordinary: Stocks and mutual funds | Tsumitate: Mutual funds suitable for long-term investment Growth: Stocks and mutual funds |
| Eligible Persons | Tsumitate & ordinary NISA: Adults Junior NISA: People under 20 years old | People 18 years old and over (Junior NISA abolished) |
| Tax Exemption Period | Tsumitate NISA: 20 years OR Ordinary NISA: 5 years | Unlimited |
| Annual Limit | Tsumitate NISA: ¥400,000 OR Ordinary NISA: ¥1.2 million | Tsumitate framework: ¥1.2 million Growth framework: ¥2.4 million |
| Total Investment Limit | Tsumitate NISA: ¥8 million OR Ordinary NISA: ¥6 million | ¥18 million (includes up to ¥12 million in the growth framework) |
Recommended Resources for NISA
- NISA活用入門 is the best book on the NISA that I have read. It is in Japanese, but is fairly accessible.
- The RetireJapan Guide to NISA is also pretty good!
- The official NISA website has lots of information, as you’d expect, but in Japanese only.
Next Steps: How to Start a NISA
All of the major stock dealing companies offer the ability to buy investments (mutual funds and stocks) within a NISA. If you don’t have an account already, here are the NISA account pages for the big three:
For advice on which company is most suitable for you, or for any other questions about Japan’s NISA system, feel free to visit the friendly RetireJapan forum.