Japan mulls higher tax-free amount for NISA accounts

28 August 2014   Category: News, Asia, Global, Japan   By Maya Ando

Japan’s government has proposed increasing the tax-free amount for retail investments into its NISA (Nippon Individual Savings Account) scheme by two-to-three times, as well as lowering the minimum age for account holders from 20 to 18 years old.

As things stand, the current tax-free quota for NISA is 1 million yen (US$9,623) for a period of five years.

Simultaneously, authorities are also considering expanding the investment scheme to cover juveniles via a Child NISA. Modelled on the UK’s Junior ISA, the programme could launch in Japan in 2016. Under the child version of the scheme, there would be no tax on profits from investments made through nominees, such as parents and grandparents, if the amount is below 1 million yen.

An industry source told Asia Asset Management that the government wants to encourage people with no prior investment experience to participate in the equity market, which would boost liquidity.

Japan is facing crippling demographic issues as a result of its declining population caused by a lower birth rate, which has made authorities concerned over a possible pension crunch in future. To meet future demand in retirement liabilities, the government has considered delaying the retirement age, as well as encouraging pension funds to increase exposure to riskier assets and local equities.

According to a Nikkei survey covering ten major securities houses, the number of investors that have opened NISA accounts and invested in asset classes including equities, mutual funds and ETFs, was 1.05 million by June 30. The number of NISA account holders was 3.63 million, up from by 0.4 million at the end of March 2014. The total investment amount was 700 billion yen, with the average investment amount per person at 660,000 yen.