People walk past an electronic screen showing Japan’s Nikkei stock price index at a commercial building in Tokyo, Japan September 22, 2022. REUTERS/Kim Kyung-Hoon/File Photo Acquire Licensing Rights
TOKYO, Nov 30 (Reuters) – NISA, or Nippon Individual Savings Account, is a Japanese government tax-free stock investment program for individuals that will undergo a major overhaul in January. NISA aims to turn trillions of yen held in cash by households into stock market investments.
Prime Minister Fumio Kishida has for months touted this NISA makeover as part of his “new capitalism” scheme to increase household wealth and asset holdings by helping households invest in riskier assets such as stocks. Yet, for most of its existence, the most popular investment vehicles were mutual funds tracking US and other global stocks.
MORE ABOUT NISA
Japan launched NISA in 2014, modeled after the UK’s Individual Savings Account (ISA) system.
There are two types of NISA accounts: general NISA and tsumitate (savings) NISA.
The general account includes domestic and foreign stocks, as well as exchange-traded funds (ETFs), real estate investment trusts (REITs), and mutual funds. Tsumitate NISA is designed for mutual funds for long-term investments.
Individuals can currently invest up to ¥1.2 million ($8,020) per year in NISA general accounts or up to ¥400,000 in tsumitate accounts, and earnings from these investments are eligible for exemption from the 20% capital gains tax in Japan. The investment amount and tax exemption is valid for five years for general NISA and 20 years for tsumitate NISA.
HOW IS NISA CHANGING?
From January, the NISA total and sums will be changed to a growth framework and sums. The amount that individuals can invest annually will be ¥3.6 million, within which the total NISA limit will be doubled to ¥2.4 million.
Each individual will be entitled to hold a total balance of ¥18 million in NISA, which will be tax-free in perpetuity.
WHY IS NISA EXPANDING?
Kishida has made NISA a pillar of his vision of a “new form of capitalism,” which emphasizes concepts such as better distribution of wealth and a virtuous cycle of growth.
In an aging society where more than half of household financial assets are held in cash, Kishida aims to double household investment income and help people rely less on public pension funds.
Japanese households held a record 2,115 trillion yen in financial assets as of June, up 4.6 percent from a year earlier, according to the Bank of Japan. More than half are held in cash.
WHO INVESTS IN NISA?
The number of NISA accounts stood at 19.4 million as of June this year, according to the FSA, up from 7.27 million in June 2014.
Of the total number of accounts, people in their 40s accounted for 18.9%, the largest share this year, with those in their 50s accounting for 18%. Those aged 80 make up 6.7% of the total.
WHAT ARE THEY BUYING?
NISA account holders spent 32.8 trillion yen from 2014 to June to buy stocks and other financial products, according to the FSA. This year alone, they spent ¥2.7 trillion.
The most popular products are investment trusts, with people buying 19 trillion yen of them so far, or 58.8% of the total, followed by individual stocks worth 12.4 trillion yen, or 38%.
They bought ETFs worth ¥793 billion and REITs worth ¥239 billion.
Most analyst estimates show that the money went mostly to US equity funds and individual US stocks.
($1 = ¥149.6200)
Reporting by Brigid Reilly and Junko Fujita Editing by Vidya Ranganathan
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