Let’s start with the obvious—asking yourself “How do I invest?” implies you have money left over after every paycheck, and that you have already set aside at least a three-month emergency fund.
If you’re fortunate enough to be in this position, though, figuring out how to secure your finances can feel a bit staggering. This is especially true when you are in a new country, operating in a different language and facing a totally unfamiliar set of rules and possibilities.
A quick aside on the content you will find below:
- I am not a financial advisor. I am just a bit of a nerd when it comes to numbers and personal finance, which is why I enjoy doing this kind of research.
- I am assuming that every reader has a basic understanding of investing, such as what a stock is, why diversifying your portfolio matters, and why time in the market is generally better than timing the market.
- To stay on track, I will avoid adjacent topics like active day trading or FX margin risk.
Most importantly, I’d like to stress that everyone’s situation is different. I can guide you through my personal journey of setting up my finances in Japan, but you shouldn’t blindly follow everything I’ve done. Think of the following information as a blueprint, not a strict recipe:
- What to know about your investments back home
- Identifying what kind of tax resident you are
- How Japan taxes your investments
- How to choose the right investment account for you
- Selecting a broker
- The steps of opening an account
- My personal investment strategy
- How to manage a NISA account
- How to keep investing in just 10 minutes a month
- Frequently Asked Questions
Your investments back home
I am originally from France. Back there I followed a “lazy investor” approach, putting money into a global index fund every single month. This meant that regardless of what the stock market was doing, I was investing in an index composed of the biggest companies in the world. No stock picking, no trying to time the market.
This strategy is generally considered to offer the best risk-to-reward ratio over time, especially given the minimal amount of effort it requires. My goal was to replicate this exact setup here in Japan.
But even before I started investing in Japan, I had to figure out some things. What about my existing investments in France—were they going to be taxed in Japan? And if I started investing in Japan now, would France tax that, too? If you don’t know much about France, we are known for our humor, delicious croissants, and having some of the highest taxes in the world.
Yes, double taxation is a real risk. By the way, these treaties don’t just apply to investments; they usually cover all forms of income, including your salary or real estate.
There is another important piece of context to add—how long have you been living in Japan?
Are you a tax resident of Japan?
If, like me, you’re not a Japanese citizen and have lived in Japan for less than 5 years out of the past 10, you are most likely considered a Non-Permanent Resident (NPR) for income tax purposes. For other tax purposes, your status will depend on your nationality, duration of stay, and type of visa, so be sure to check carefully before you assume.
Income tax resident status matters because it changes how we must report our foreign income. If you are considered a Permanent Tax Resident, you must report all income, both domestic and foreign. If you are an NPR, however, you only need to report foreign income if you actually bring that money into Japan.
How Japan taxes your investments
Now, let’s take a look at the default tax scheme here in Japan:
- Taxes are only due on capital gains and dividends, not on your total portfolio value.
- Taxes are applied to realized gains. This means if you don’t sell your assets or generate dividends, no taxes are due.
- A flat rate of 20.315% is applied.
Overall, it is pretty similar to France, except the taxes are lower. (Did I already mention that it is hard to compete with France in that regard?)
Choosing the right investment account
Since I had confirmed I could invest here and understood the tax schemes, I needed to figure out how to invest. Usually every country has various investment accounts that you can open to invest in ETFs or funds, each with different tax advantages and conditions.
For instance, in France, you have the Compte Titres Ordinaire (CTO), which is the default investment account. There is no limit on how many of these you can open, and it comes with a default tax rate on capital gains of 31.4%. But you also have access to the Plan d’Épargne en Actions (PEA), a special account where you are limited to opening just one. It has a deposit cap and a minimum holding period before you can withdraw your money, but in return the tax rate is reduced to 18.6%.
This is a huge difference, so I needed to find out if Japan offered a similar tax-advantaged account.
Default accounts
The default investment accounts here are the General Account (一般口座, ippan kouza) and the Specific Account (特定口座, tokutei kouza). They are essentially the same, but they differ on who keeps the records and pays the taxes.
- General Account: You need to track everything and pay your taxes on your own.
- Specific Account: The broker tracks everything for you, calculates your profits, and issues an annual transaction report. You just need to decide whether to open it with or without tax withholding. If you choose withholding, the 20.315% tax mentioned earlier is automatically deducted when necessary. If you choose no withholding, you need to file a tax return yourself every year.
To be honest, I am not sure why anyone would choose a General Account. Apparently some investments cannot be held in a Specific Account, but since that doesn’t apply to my situation I didn’t dive too deeply into it.
The NISA
Of course the NISA is not unlimited. You can only open one, and in it you can invest up to a maximum of 18 million yen.
The annual allowance is split into two parts: a Growth portion (up to 2.4 million yen per year) and a Savings portion (up to 1.2 million yen per year). The Savings portion has additional restrictions on how you can invest and which funds you can buy, but for a global index strategy like mine, that’s really no issue.
If you do the math, you can fully max out your NISA in a minimum of five years (that is, if you manage to save an average of 300,000 yen a month).
The iDeCo
The next interesting plan is called the Individual Defined Contribution Pension (iDeCo). Essentially, this account offers tax advantages when you withdraw the funds, and you can even deduct the money you invest from your taxable annual income. However it is designed for retirement, meaning you generally cannot withdraw the money until you reach the age of 60.
To be honest I haven’t researched it too deeply because I am not using it—a decision I’ll explain further later.
The Corporate DC
The last one is the Corporate DC (企業型DC, kigyou-gata DC). It has the same basic concept as iDeCo, but it is company-sponsored. This one is very much like a 401(k), for our American friends.
And the winner is . . .
For me personally, a Corporate DC account was out of the question, as my company does not offer one.
iDeCo is considered one of the best options here, and it is often overlooked by foreigners. However I decided against it as I currently have no idea if I am going to stay in Japan forever, or for just a couple of years. Having my money locked in another country, without the possibility of getting it back until I am 60, scares me a bit.
Which broker is best?
To decide which broker to use for my NISA, I compared them based on a few key criteria: popularity, fund selection, fees, and ease of use.
Regarding fees, I soon found that none of the major players were charging any—no maintenance fees, trading commissions, etc. So there was nothing to evaluate on that front.
Online
There are also alternative options to consider. For instance, if you mainly use PayPay, they offer a NISA as well.
International residents might also be familiar with Interactive Brokers (IBKR). They started offering a NISA last year, which could be great if you plan to leave Japan eventually, as you potentially wouldn’t have to sell your investments when you leave. However their NISA was new when I was doing my research, and I didn’t want to take the risk of using a new product.
Traditional banks
Traditional banks also usually offer a NISA, but the downside is they provide far fewer investment options. This might have been a non-issue since I only planned to invest in global index funds that are supported by almost every provider, but I like to keep my options open. Plus my regular bank did not offer a NISA anyway.
There is potentially one good reason to go with a traditional bank. I personally don’t speak Japanese, so I was really hoping to find an online option that supported English. If you were hoping for the same, I’m sorry to disappoint you. While IBKR might support English, the major Japanese brokers definitely do not. You will have to rely on Google Translate for everything.
Point systems
If you have been living in Japan for a while, you probably know that people love to collect points here. And guess what? You can collect points while investing in your NISA too! So depending on the point ecosystem you are already in, that might influence your choice. This wasn’t a factor for me, as I am not really into chasing points and rewards (ポイ活, poi-katsu).
Why SBI
In the end, I decided to go with SBI Securities. I don’t use the Rakuten ecosystem at all and SBI’s interface just looked a bit cleaner to me than Monex’s. Honestly, though, you can’t really go wrong with any of those three options.
Opening the account
Opening the account was pretty similar to opening a bank account in Japan. Don’t expect to complete the process in 10 minutes and start investing right away.
First you have to complete the initial registration online, and then they send you a physical form in the mail. It is mostly pre-filled with the information you already provided, but you have to send it back with a copy of your ID. Then you wait again for them to review the documents.
If I remember correctly, it took me about two to three weeks from start to finish, which is not too bad. At least I didn’t have any issues with how I entered my name or anything like that. If you live in Japan, you are probably already familiar with how an information mismatch can take ages to resolve.
One quick note: Before opening a NISA, you actually need to have a regular investment account with the broker. I was able to open both at the same time and I assume you can do the same at any broker (don’t quote me on that).
I had to choose between a General Account and a Specific Account. As I mentioned earlier, I see no point in choosing a General Account, so I went with the Specific. I also selected the “with tax withholding” option because I don’t currently file a tax return myself, making this the simplest route. If I’m not mistaken, you can always change this withholding option later anyway.
What I’m investing in
To avoid confusing my European friends—these are not ETFs like we are used to. They are Mutual Funds. Without going into unnecessary detail, this basically means you aren’t buying the shares directly on the open market. Instead, you are placing an order that the fund manager will execute later. If I place an order on the morning of the 6th, it will usually be completed the next day, and I will see the funds in my NISA account about a week later.
Managing the account
How do I actually manage the account now? As I mentioned, I apply a lazy investor approach using a dollar-cost averaging (DCA) strategy at the start of every month. The only exception is when I get a bonus at work and want to put in a bit more.
For this example, let’s imagine I want to max out my NISA every year, which means investing 300,000 yen every month (a man can dream).
Send the money
First I need to send money to my SBI account. There are several ways to fund your account, but I use a standard bank transfer. If your bank is connected to SBI’s network, the transfer is instant. If it isn’t (as in my case), SBI gives you a specific account number and a reference code to include when you make the transfer.
If I send the money in the morning, it usually shows up in my account by the afternoon. Once the money arrives, I need to allocate it into the two buckets I mentioned earlier, Growth and Savings.
Set up a schedule for the Savings account
The Savings portion is, as the name suggests, designed to make regular savings. You can’t just buy funds on the spot, you have to define a specific amount to be purchased on a recurring schedule.
In my example, I could configure a rule like: Every 14th of the month, buy 100,000 yen worth of this fund. Since the Savings portion is capped at 1.2 million yen per year, this setup will perfectly max it out. I just need to make sure I transfer enough money into my SBI account before the 14th.
I have friends who set up custom rules for their bonus months, like: Every 14th invest 50,000 yen, but in January and July, invest 300,000 yen instead. This has the same results in the end.
A quick note: I always manually transfer money to my SBI account beforehand. However for the Savings portion, you can actually skip this step. Most people register a credit card to be charged directly for these automated purchases (for the extra points!). I did not do this, because my credit limit is quite low, since I only arrived recently.
Then manage the Growth account
Now for the Growth portion, which is where you can make transactions at will. It may be possible to automate this as with Savings (depending on your broker), but I prefer to do it manually every time, since this is also when I check my account status. Following my example, this would mean I log in and buy 200,000 yen worth of the index fund every month. That’s it.
Just 10 minutes a month
And voilà! I hope this didn’t sound too complicated because it really isn’t. Once everything is set up, managing my investments takes me maybe 10 minutes a month. Here is a quick summary.
To do once:
- Assess your investment options
- Choose the funds you want to buy
- Choose your broker
- Open the account
- If you choose NISA, set up the Savings portion schedule
To do every month:
- Transfer money to your broker
- Invest in the Growth portion
According to my Japanese friends, regular investing is part of the culture here. The government is promoting it and regularly changes the laws (in a good way) to encourage people to do it. I assume this is mostly because the public pension system is rarely enough to cover your living expenses once you retire—but that’s a subject for another article.
Frequently Asked Questions
A few quick closing remarks on questions you might have.
What if I max out my NISA?
If I can’t invest in my NISA anymore, either because I hit the 18 million yen lifetime limit or the 3.6 million yen annual limit, I will simply buy the exact same index funds using my Specific Account instead.
What about becoming a Permanent Tax Resident?
This usually happens after five years of residency. Personally, if I decide to stay in Japan long term, I will need to consider what to do with my French investments before I become a Permanent Tax Resident. In my case, it seems like selling them right before that deadline would be the best move.
What if I stay long term?
In that case, you should definitely take a look at opening an iDeCo. If my plans change and I decide to stay in Japan longer, I will do the same.
What if I leave Japan?
If you leave Japan, you are generally required to close your NISA. This means you will be forced to sell your positions, regardless of what the market is doing at that exact moment. Being forced to sell during a market dip is not good, so if I do plan to leave, I will prepare as early as possible to sell off my portfolio gradually. If you use an international broker like IBKR you might not be forced to sell, which is a major advantage.
Watch out for the Exit Tax as well. Depending on a few factors—like your visa status, how long you’ve lived in Japan, and the total value of your assets—you might actually need to pay taxes on your unrealized gains when you leave the country.
