How to Invest in Japan

Metropolis Japan

21-05-2025

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It has never been easier for Japan residents to organise and manage their investments. This guide covers a few financial planning basics and breaks down two tax-advantaged investment products.
Regardless of nationality or country of residence, there are three basic things that people should consider to protect themselves financially: Emergency cash reserve
Basic insurance
Pension / long-term savings
Firstly, it is prudent to build up an emergency cash reserve. This money is kept in cash in the bank. It is not invested and should be easily accessible. The purpose of the cash reserve is to meet monthly expenses in the event of loss of employment. The typical advice is to build up 3-6 months of expenses in cash before beginning to invest for the longer term. Some people may feel comfortable with a larger cash reserve.
Secondly, it is wise to consider private health insurance and income protection insurance. Company employees in Japan are enrolled in the national health insurance scheme. However, this does not cover longer-term sickness. Income protection insurance is designed to pay a portion of the policyholder's income if they become unable to work due to illness or injury.
Lastly, people should consider allocating part of their disposable income to longer-term investments to help fund their retirement. Again, company employees will likely be enrolled in the national pension scheme. They may choose to supplement these contributions by making further investments themselves.
Are you interested in setting up a credit record in Japan, but you don't know how it works? Head to our simple guide How Does Japan's Credit System Work? and learn more. Image credit: bee32 / iStock
Investors have many options, both domestically and internationally. Two Japanese investment products stand out because they offer significant tax advantages. The Nippon Individual Savings Account, or NISA, was launched in January 2014, and the offering has been significantly improved in recent years. NISA was designed to encourage residents of Japan to invest for the future.
iDeCo stands for the Individual Defined Contribution Pension. It is a self-managed retirement savings plan that can be used to supplement contributions to the national pension. Eligibility : Anyone over the age of 18 who lives in Japan can open a NISA account
: Anyone over the age of 18 who lives in Japan can open a NISA account Annual Investment Limit: Up to ¥3.6 million per year
Up to ¥3.6 million per year Contributions are divided between the regular investment allocation, which can invest in mutual funds, and the growth allocation , which is free to be invested in mutual funds, stocks and Exchange Traded Funds (ETFs)
which can invest in mutual funds, and the , which is free to be invested in mutual funds, stocks and Exchange Traded Funds (ETFs) Tax Benefits: Capital gains and income from dividends are free of the standard 20% tax charged on regular investments
Capital gains and income from dividends are free of the standard 20% tax charged on regular investments Lifetime Contribution Limit: Up to ¥18 million total
Up to ¥18 million total Holding Period: Unlimited, you can keep assets tax-free for as long as you want.
Unlimited, you can keep assets tax-free for as long as you want. Flexibility: No minimum holding period, you can sell anytime without losing tax benefits.
To summarize, individuals can invest up to ¥18 million over their lifetime, and the investments will be free of tax on capital gains and dividends. Detailed information can be found on the Financial Services Agency website. (Japanese only) Eligibility : Generally, anyone over the age of 20 who resides in Japan and contributes to the National Pension is eligible
: Generally, anyone over the age of 20 who resides in Japan and contributes to the National Pension is eligible Tax-Deductible Contributions: All contributions reduce your taxable income.
All contributions reduce your taxable income. Investment returns are tax-free
Tax deductions apply when receiving benefits
Payout Options: Benefits are available from age 60 onwards and can be received as a lump sum, an annuity, or a combination of both
Detailed information on iDeCo, including the maximum contribution limits, can be found on the iDeCo official website, which is available in English. Image credit: Tadamichi / iStock Feature NISA iDeCo Purpose Tax-free investing for general savings and wealth building Private retirement savings with tax advantages Eligibility Residents of Japan aged 18 and over Residents of Japan aged 20 and over who contribute to the National Pension Annual Contribution Limit ¥3.6 million total Varies by employment type Lifetime Contribution Limit ¥18 million No formal lifetime limit; capped by monthly/yearly contribution rules Tax Benefits – Contributions Not tax-deductible Fully tax-deductible from income Tax Benefits – Returns Tax-free returns (capital gains, dividends, etc. are not taxed) Tax-free returns (capital gains, dividends, etc. are not taxed) Tax Benefits – Withdrawals No additional tax Withdrawals may be taxed, but tax deductions apply (retirement/annuity) Withdrawal Timing Anytime — no minimum holding period After age 60 (with few exceptions) Withdrawal Method Sell assets anytime without penalties Lump sum, annuity, or both Main Advantage Flexible, tax-free investing for short- or long-term goals Strong tax incentives for long-term retirement savings
Both NISA and iDeCo are available through a range of financial institutions, including banks, insurance companies and securities firms. These days, many investors use online brokerage accounts to access these products. Rakuten Securities and SBI Securities are two of the most popular online brokerages.
Applications can be made on the website. Foreign residents will be asked to send copies of their residence card and My Number card by mail following the initial application.
A word of caution: U.S. citizens are subject to global taxation, and NISA and iDecCo are generally not considered suitable for them due to the onerous tax reporting requirements on Passive Foreign Income Companies (PFIC). With careful planning, it is possible to avoid PFICs in the growth part of NISA, however, people unsure of the tax situation should seek professional advice.
To conclude, Japan has excellent tax-advantaged investment options available to residents. Unfortunately, the online brokerage accounts still require users to navigate in Japanese, although online translation tools make that easier.
Last summer Bank of Japan issued new designs of the ¥1,000, ¥5,000 and ¥10,000 banknotes. Read about the new notes in our article Bank of Japan Introduces New Banknotes.