Investing in Japan

Japan is the world's fourth-largest economy and home to the Tokyo Stock Exchange — the third-largest stock exchange by market cap. After decades of deflation, Japan's markets are experiencing a renaissance driven by corporate governance reforms and a revival of inflation.

Japanese Investment Accounts

NISA (Nippon Individual Savings Account)

Tax-free investment account for Japanese residents. In 2024, NISA was reformed: two components — Tsumitate NISA (installment investing, up to ¥1.2M/year, tax-free for 20 years) and Growth NISA (lump sum, up to ¥2.4M/year, tax-free indefinitely). No capital gains or dividend tax within the account.

Contribution limits: Total lifetime limit of ¥18M (¥12M Growth + ¥6M Tsumitate). Non-transferable; you can hold both simultaneously.

iDeCo (Individual Defined Contribution Pension)

Japan's private pension system. Contributions are tax-deductible. Investment growth is tax-deferred. Withdrawals are taxed as pension income (but with significant deductions). Contribution limits: ¥12,000-¥68,000/month depending on employment status and whether you have a corporate pension.

General Securities Account

Taxable account. Dividends and capital gains taxed at a flat 20.315% (15% national + 5% local + 0.315% reconstruction surcharge). Losses can be carried forward for 3 years.

Tokyo Stock Exchange (TSE)

In 2022, the TSE reorganized into three markets:

Nikkei 225: Price-weighted index of 225 large Japanese companies. Includes: Toyota (7203), Sony (6758), Mitsubishi UFJ (8306), Fast Retailing/Uniqlo (9983), Tokyo Electron (8035).

TOPIX: Float-adjusted market-cap-weighted index of all TSE Prime-listed companies. More representative of the full market. Popular ETF: 1306.T (Nomura TOPIX ETF).

Corporate Governance Reforms

Since 2023, the TSE has required companies with a P/B ratio below 1x to disclose plans to improve capital efficiency. This has driven a wave of buybacks, increased dividends, and cross-shareholding unwinding. Result: Japan's market has outperformed most developed markets in 2023-2026.

Dividend Culture

Japanese companies traditionally paid low dividends, but payout ratios have increased significantly (from ~20% to ~35% over a decade). Dividend withholding tax: 20.315% for residents. Treaty rates for foreign investors vary (e.g., 10% for US, 10% for UK).

Best Brokers for Japan Residents

Key Considerations

Popular Japan ETFs