Accumulation-type NISA available in Japan

January 1, 2018

Tokyo- Japan added a "tsumitate" accumulation type to the lineup of the Nippon Individual Savings Account small-lot tax-free investment scheme on Monday.

The government hopes to nurture next-generation investors by using the new NISA type targeting workers in their 20s to 40s. It also aims to encourage younger generations to accumulate wealth for home purchases and life after retirement.

The annual investment limit stands at 400,000 yen for the accumulation NISA program, which exempts individual investors from taxation on dividend income and capital gains for up to 20 years.

For the program, the Financial Services Agency has selected beginner-friendly investment trust funds and exchange-traded funds.

Investors cannot buy individual stocks through the program. But investment risks and commission charges are considered relatively low.

In Japan, half of individual financial assets totaling 1,800 trillion yen are kept as cash or deposits although the government has tried for a long time to promote a shift from savings to asset formation.

This apparently reflects an entrenched mindset to avoid investments because many amateur stock investors incurred massive losses following the collapse of the country's bubble economy in the early 1990s.

By adding the new program to the NISA scheme, whose first version was released in January 2014, the government aims to let larger amounts of funds flow to companies from households, buttressing economic growth.

But a majority of market experts, including Japan Securities Dealers Association Chairman Shigeharu Suzuki, expect that the new program will take time to become popular.

People in their 20s to 40s tend to face housing loan costs and education fees for children. It is not easy for such people to save 30,000 yen per month for investment, an industry source said.

To securities firms, the accumulation type is unlikely to become profitable anytime soon. But they need to acquire new clients in younger generations amid a rapid aging of their customer bases. Jiji Press