Decades of near-zero interest rates left most household savings sitting in bank deposits rather than markets. That is changing: the government has actively pushed households toward equities through tax-advantaged accounts as the Bank of Japan normalizes policy.
20.315%tax on investment gains outside NISA
¥3.6mannual NISA contribution capacity
¥18mNISA lifetime limit
0%tax on gains inside NISA
Capital
Tokyo
Currency
Japanese yen
Main exchange
Tokyo Stock Exchange (JPX)
Regulator
Financial Services Agency (FSA)
How people invest in Japan
The NISA tax-free investment account (expanded in 2024) is now the default on-ramp for new retail investors, typically into low-cost index funds and blue-chip dividend payers. Japanese Government Bonds, real estate, and — for the wealthy — stakes in family-controlled keiretsu-descended firms round out the picture.
NISA index fundsJapanese Government BondsBlue-chip dividend equitiesReal estate
Getting access
Residents and international investors face completely different mechanics here, so they are set out separately rather than blended into one set of instructions.
Living in Japan
Opening an account as a resident
Japan spent decades as a country where households held cash and did not invest. The reformed NISA is a deliberate and unusually generous attempt to change that, and it has largely worked.
Open a securities account with an online broker. The large online brokers compete hard and charge little for domestic trades.
Open a NISA account first. You may hold only one NISA across all providers, so the choice of broker matters more than usual.
Understand the two NISA baskets. The reformed structure allows roughly ¥1.2 million a year into the accumulation basket and ¥2.4 million into the growth basket — about ¥3.6 million a year — against a ¥18 million lifetime limit. Gains and dividends inside it are untaxed, and there is no expiry.
Everything outside NISA is taxed at 20.315% on gains and dividends — 15% income tax, a 2.1% surtax and 5% local inhabitant tax. A specified account with withholding lets the broker handle reporting, which is why most residents choose it.
iDeCo is the pension layer: contributions are deductible, growth is untaxed, and the money is locked until 60. It stacks with NISA rather than competing with it.
The 2026 tax reform extends NISA to minors by abolishing the lower age limit, and moves gains on specified crypto assets to the same 20.315% separate taxation instead of miscellaneous income taxed at graduated rates reaching 55% — a very large change for anyone holding crypto in Japan.
International
Investing in Japan from outside
Japan is one of the most open large markets in Asia for foreign investors. There are no ownership caps on most listed equities and no capital controls.
Most international brokers offer Tokyo Stock Exchange access directly, and Japan ETFs are deep and liquid in every major market.
NISA and iDeCo are resident schemes. A non-resident cannot use them, which means a foreign investor pays tax somewhere on returns a Japanese resident can shelter entirely.
Understand the governance story, because it is the actual investment case. The TSE restructured its markets into Prime, Standard and Growth segments in 2022, then in 2023 began pressing companies trading below book value to publish plans for improving capital efficiency.
Currency is the dominant variable. A strong year for Japanese equities in yen has repeatedly translated into a mediocre one in dollars, and the reverse. Whether to hedge is a bigger decision here than stock selection.
Foreign investors have been the marginal buyer of Japanese equities through the reform rally, which means sentiment about the reform matters as much as the reform itself.
What you can actually buy
Japan's menu is shaped by an unusual fact: the tax shelters available to residents are generous enough that where you hold something matters as much as what you hold.
Japanese equities
Both
The TSE is deep, liquid and now structured into Prime, Standard and Growth segments after the 2022 restructuring. The governance reform push is the live investment thesis.
The local mechanic: Held in NISA, gains and dividends are untaxed. Held outside, they attract 20.315%. Same shares, materially different outcome.
NISA
Residents
The reformed scheme is permanent, has no holding-period expiry, and allows around ¥3.6 million a year against an ¥18 million lifetime cap.
The local mechanic: Lifetime capacity is restored when you sell, which is unusual — most tax wrappers internationally do not let you reuse the allowance. It makes NISA far more flexible than its predecessors.
iDeCo
Residents
The defined-contribution pension layer. Contributions reduce taxable income, growth is untaxed, withdrawals are locked until 60.
The local mechanic: The deduction is the main benefit and it scales with your marginal rate, so iDeCo is worth relatively more to higher earners than NISA is.
Residential property
Both
Foreigners can buy freehold property in Japan with no residency requirement and no ownership restriction — genuinely rare in Asia.
The local mechanic: Japanese buildings depreciate as an asset in a way most markets do not; value concentrates in land. Buying a house expecting the structure to appreciate is a category error here.
The fund and ETF route
For residents the wrapper decision dominates. For foreigners the currency decision does.
Vehicle
Type
For
Notes
NISA-eligible investment trusts
Open-ended
Residents
The accumulation basket is restricted to a screened list of low-cost, diversified funds — a deliberate design choice to stop first-time investors buying expensive products.
TSE-listed ETFs
Listed ETF
Both
Include a large domestic market and broad global index products denominated in yen.
Offshore Japan ETFs
Listed ETF
International
Widely available in both hedged and unhedged form. That choice has driven more of the realised return over the last decade than the equity selection.
Japan's startup ecosystem is smaller than its economy implies, and the government has been actively trying to change that.
The Growth segment of the TSE provides an unusually accessible domestic listing route, which has historically encouraged companies to list early and small rather than scale privately.
Corporate venture capital is disproportionately important here relative to independent funds.
Angel tax incentives exist for qualifying investments, and are considerably less used than they could be.
Japan's investment tax is simple in structure: one flat rate outside the shelters, nothing inside them.
What
Rate
Applies to
Capital gains and dividends
20.315%
15% income tax, 2.1% surtax, 5% local inhabitant tax
Inside NISA
0%
Gains and dividends, no expiry
NISA annual capacity
~¥3.6m
¥1.2m accumulation plus ¥2.4m growth basket
NISA lifetime limit
¥18m
Restored when holdings are sold
Specified crypto assets
20.315%
Under the 2026 reform, replacing graduated rates up to 55%
A "specified account with withholding" has your broker calculate and withhold the tax, which removes the need to file for most salaried investors — the reason it is the default choice. The 2026 reform also abolishes the lower age limit for NISA accounts. This is general information rather than tax advice, and non-residents are taxed under different rules.
Risks worth pricing in
International
What international investors should weigh
Japan is easy to buy and easy to misjudge, and the misjudgements are consistent:
Currency has dominated the return. Yen moves have repeatedly swamped equity performance for unhedged foreign holders. The hedged-versus-unhedged decision has mattered more than which Japanese companies you owned, and it is usually made by default.
The governance reform is a process, not an event. The TSE's pressure on sub-book-value companies has produced real buybacks and real disclosure. It has also produced a lot of compliance documents. Distinguishing the two is the actual work.
Demographics are a genuine long-run constraint. A shrinking, ageing population limits domestic demand growth in a way no amount of governance reform addresses. The companies that escape it are the ones with revenue outside Japan.
You cannot use the shelters. A Japanese resident can hold the same portfolio entirely tax-free inside NISA. A foreign investor cannot, which quietly changes the comparison of after-tax returns.
Residents
What domestic investors should weigh
For residents the schemes are generous. The risks are mostly about not using them, or using them badly:
Cash is still the default and it is costly. Japanese households hold an unusually large share of assets in cash. After decades of deflation that was defensible; with inflation returned it is a slow, reliable loss.
One NISA, one provider. You may hold only one NISA account at a time, so a poorly chosen broker is genuinely inconvenient to escape. Choose for fund availability and cost, not for the sign-up promotion.
iDeCo locks money until 60. The tax deduction is real and so is the lock. It is the right vehicle for money you were never going to touch, and the wrong one for anything else.
Home country bias is heavy. Domestic investors overwhelmingly hold Japanese assets, in an economy where their salary, pension and housing already sit. Global funds inside NISA are the straightforward fix and are under-used relative to domestic products.
How the market got here
Japan's market has spent thirty years recovering from one bubble and the last five being deliberately restructured.
1878The Tokyo Stock Exchange is established.
1989The Nikkei peaks near 39,000. The asset bubble ends and a long deflationary period begins.
2001The Financial Services Agency takes its current form as the unified regulator.
2014The original NISA launches, alongside a corporate governance code and stewardship code.
2022The TSE restructures into Prime, Standard and Growth segments.
2023The TSE asks companies trading below book value to publish plans for improving capital efficiency, triggering a wave of buybacks and cross-shareholding unwinds.
2024The reformed NISA takes effect — permanent, larger, and with reusable lifetime capacity. The Nikkei passes its 1989 high.
2026Tax reform abolishes the NISA lower age limit and moves specified crypto assets to 20.315% separate taxation.
Trends shaping Japan
Regional investing patterns that show up strongly in Japan — read the full analysis in investing trends.
A permanent tax-free investment account for Japanese residents. The reformed structure allows roughly ¥1.2 million a year into the accumulation basket and ¥2.4 million into the growth basket — about ¥3.6 million annually — against an ¥18 million lifetime cap. Gains and dividends inside are untaxed with no expiry, and lifetime capacity is restored when you sell, which most international equivalents do not allow.
How much tax do I pay on investments in Japan?
20.315% on gains and dividends held outside a tax-free account — 15% income tax, 2.1% surtax and 5% local inhabitant tax. Inside NISA the rate is zero. Choosing a specified account with withholding lets your broker handle the calculation and filing.
Can foreigners buy Japanese stocks and property?
Yes to both, with unusually little friction. There are no ownership caps on most listed equities and no capital controls, and foreigners can buy freehold property with no residency requirement — rare in Asia. NISA and iDeCo, however, are resident-only schemes.
What is the TSE governance reform actually about?
In 2023 the Tokyo Stock Exchange began pressing listed companies trading below book value to publish concrete plans for improving capital efficiency. It has driven substantial buybacks, dividend increases and unwinding of cross-shareholdings. It is the central reason foreign investors returned to this market, and separating genuine change from compliance paperwork is the analytical task.
Should I hedge the yen?
For a foreign investor it is the single biggest decision, and bigger than stock selection. Yen movements have repeatedly overwhelmed equity returns in both directions over the past decade. There is no universally right answer, but making the choice deliberately rather than by default is what matters.
NISA or iDeCo first?
They stack rather than compete. NISA is flexible with no lock-up; iDeCo gives an income deduction but locks money until 60. Because the iDeCo deduction scales with your marginal rate, it is worth relatively more to higher earners — but for money you might need before 60, NISA is the only sensible answer.
Rates, thresholds and regulatory references on this page were last verified on . Japan's rules are moving quickly — confirm anything you intend to act on against a primary source or a qualified adviser. Nothing here is investment, legal or tax advice.
