Beginner - US/JP dual citizen in Tokyo

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Topic Author
whizzo
Posts: 4
Joined: Fri Nov 08, 2019 4:11 am

Beginner - US/JP dual citizen in Tokyo

Post by whizzo » Wed Nov 13, 2019 3:16 am

Hi everyone,

I am new to investing and have just dived into it very recently after multiple failed past attempts. I don't have any specific financial goals atm, I just figured I should do something with my savings rather than let them rot in my account, so I've spent the past few weeks tearing through online articles and brushing up on my terminology but I’m honestly completely overwhelmed by the amount of information out there and would love some guidance!

This might be a long shot but does anyone have any experience investing through the Japanese system as a JP citizen? (I'm assuming there are some crucial differences if you're an expat?? which is why I specified JP citizen. but again I have no idea) If so, what was your goal, and how did you go about it?

I currently have US & Japan dual citizenship and hold savings accounts in both US/USD and Japan/JPY, but I live and work in Tokyo so practically all my savings are in my JPY account. Unfortunately I was raised in the US so my grasp of the Japanese language is quite limited, especially when it comes to financial jargon. I'm very uncomfortable with handling money and the language barrier on top of that is killing me. Was wondering if I could hear some people's firsthand experiences just to give me some examples of how to get the ball rolling.

Through my (limited) reading I've found out about NISA, which I'm contemplating throwing a tiny amount in as a sort of test run just to warm me up to managing my finances. I have no idea what funds are good to invest in though. All my reading has been so America-centric. It seems like even though I am in Japan a solid portfolio would be one that's skewed heavier towards US indexes, and maybe just have a little dash of Japanese/international stocks&bonds on the side? How do I figure out what is right for me? What should I be studying next?

Also, on a slightly different note. I've seen Interactive Brokers being mentioned a lot, but if I were to use them I would have to use my US citizenship and pay US taxes, correct?

Please remember I am a noob and don't really know a lot of finance lingo, please speak to me like I am a toddler lol! Thanks in advance.

typical.investor
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Re: Beginner - US/JP dual citizen in Tokyo

Post by typical.investor » Wed Nov 13, 2019 6:42 am

whizzo wrote:
Wed Nov 13, 2019 3:16 am
Also, on a slightly different note. I've seen Interactive Brokers being mentioned a lot, but if I were to use them I would have to use my US citizenship and pay US taxes, correct?

Please remember I am a noob and don't really know a lot of finance lingo, please speak to me like I am a toddler lol! Thanks in advance.
Welcome.

You will always have to pay US taxes on any holdings. It doesn't matter which citizenship you used to open the account.

Have you been making FBAR filings for your Japanese saving accounts?

The problem with NISA I believe is that you need to use US domiciled ETFs or face a US tax burden (PFIC). I am not that familiar with NISA but I haven't heard of anyplace that allows US persons to purchase US domiciled ETFs within a NISA. Do post if you find differently!!!

bpp
Posts: 2017
Joined: Mon Feb 26, 2007 12:35 pm
Location: Japan

Re: Beginner - US/JP dual citizen in Tokyo

Post by bpp » Wed Nov 13, 2019 7:13 am

Your best bet may be to buy Vanguard funds or other US-domiciled funds through Nomura Shoken. They would handle tax paperwork correctly for both your US and Japanese taxes (at least for the Vanguard and other US-domiciled funds). This keeps you out of PFICs.

Disadvantage: you mentioned a language barrier. Nomura does not have an English interface. (None of the Japanese brokers do.). You would have to become comfortable making trades over the phone for the Vanguard funds at Nomura. If this doesn’t seem within reach, you might want to look into Interactive Brokers (who I assume have an English option, though haven’t checked).

A good choice for world stocks is VT. For Japanese bonds, you could use Japanese savings bonds (kojin-muke kokusai), or simply hold cash in the bank for that part since interest rates are so low.
A two-fund portfolio of VT and Japanese savings bonds (or cash) would make a good, simple start.

No good options for NISA unless you want to make your own index from individual stocks, which it sounds like you wouldn’t want to do.

The few brokers that will allow Vanguard ETFs to be put into NISAs will NOT allow US citizens to buy Vanguard ETFs in the first place. If you skirt around this by only revealing your Japanese citizenship, they won’t do the needed tax paperwork for your US taxes.

TedSwippet
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Location: UK

Re: Beginner - US/JP dual citizen in Tokyo

Post by TedSwippet » Wed Nov 13, 2019 7:59 am

bpp wrote:
Wed Nov 13, 2019 7:13 am
Your best bet may be to buy Vanguard funds or other US-domiciled funds ...
Also, some detail in this wiki page: Investing in Japan for US citizens and US permanent residents - Bogleheads

( bpp, can you say if the information in this page remains up to date? Thanks. )

Topic Author
whizzo
Posts: 4
Joined: Fri Nov 08, 2019 4:11 am

Re: Beginner - US/JP dual citizen in Tokyo

Post by whizzo » Fri Nov 15, 2019 3:40 am

bpp wrote:
Wed Nov 13, 2019 7:13 am
Your best bet may be to buy Vanguard funds or other US-domiciled funds through Nomura Shoken. They would handle tax paperwork correctly for both your US and Japanese taxes (at least for the Vanguard and other US-domiciled funds). This keeps you out of PFICs.

Disadvantage: you mentioned a language barrier. Nomura does not have an English interface. (None of the Japanese brokers do.). You would have to become comfortable making trades over the phone for the Vanguard funds at Nomura. If this doesn’t seem within reach, you might want to look into Interactive Brokers (who I assume have an English option, though haven’t checked).

A good choice for world stocks is VT. For Japanese bonds, you could use Japanese savings bonds (kojin-muke kokusai), or simply hold cash in the bank for that part since interest rates are so low.
A two-fund portfolio of VT and Japanese savings bonds (or cash) would make a good, simple start.

No good options for NISA unless you want to make your own index from individual stocks, which it sounds like you wouldn’t want to do.

The few brokers that will allow Vanguard ETFs to be put into NISAs will NOT allow US citizens to buy Vanguard ETFs in the first place. If you skirt around this by only revealing your Japanese citizenship, they won’t do the needed tax paperwork for your US taxes.
Thanks so much for the reply! This is super helpful. I was so wrapped up in deciphering the Japanese NISA manuals that I didn't even think about the fact that if I create a NISA I would still have to pay taxes to the US if I declare my US citizenship... I would also rather avoid picking my own index since I just don't have the knowledge to do so. Maybe I'll think about giving NISA a try later on once I do some more reading. Nomura Shoken I think is out of my league simple bc of the language. Maybe IB is the best choice for me out of these three at this point...

In the meantime I will definitely look into what you suggested about having a two-fund portfolio. I want to start with baby steps and this seems simple enough for a beginner like me to figure out. Hopefully.

Thanks so much again!

Topic Author
whizzo
Posts: 4
Joined: Fri Nov 08, 2019 4:11 am

Re: Beginner - US/JP dual citizen in Tokyo

Post by whizzo » Fri Nov 15, 2019 3:41 am

TedSwippet wrote:
Wed Nov 13, 2019 7:59 am
bpp wrote:
Wed Nov 13, 2019 7:13 am
Your best bet may be to buy Vanguard funds or other US-domiciled funds ...
Also, some detail in this wiki page: Investing in Japan for US citizens and US permanent residents - Bogleheads

( bpp, can you say if the information in this page remains up to date? Thanks. )
Thanks, I will def check this out!

Topic Author
whizzo
Posts: 4
Joined: Fri Nov 08, 2019 4:11 am

Re: Beginner - US/JP dual citizen in Tokyo

Post by whizzo » Fri Nov 15, 2019 3:55 am

typical.investor wrote:
Wed Nov 13, 2019 6:42 am
Welcome.

You will always have to pay US taxes on any holdings. It doesn't matter which citizenship you used to open the account.

Have you been making FBAR filings for your Japanese saving accounts?

The problem with NISA I believe is that you need to use US domiciled ETFs or face a US tax burden (PFIC). I am not that familiar with NISA but I haven't heard of anyplace that allows US persons to purchase US domiciled ETFs within a NISA. Do post if you find differently!!!
I see... I didn't realize US taxes were applied to everything you own. Scary. I totally haven't been filing FBAR either. I remember talking to my dad about this a long time ago but we just shrugged it off and I totally forgot about it until now. (I think at that time my only account was in a US military babk, which seems to be outside of the critera?) Anyways will look into this now, thanks for the reminder!

The complexities of the NISA are scaring me lol! Maybe I will just avoid it for now until I understand it better....

TedSwippet
Posts: 2517
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Beginner - US/JP dual citizen in Tokyo

Post by TedSwippet » Fri Nov 15, 2019 4:00 am

whizzo wrote:
Fri Nov 15, 2019 3:55 am
I see... I didn't realize US taxes were applied to everything you own. Scary. I totally haven't been filing FBAR either.
Unfortunately, your US citizenship puts you in a tricky tax situation. More details in this part of the wiki:

Outline of Non-US domiciles - Bogleheads

crre
Posts: 40
Joined: Fri Apr 12, 2019 8:07 pm

Re: Beginner - US/JP dual citizen in Tokyo

Post by crre » Fri Nov 15, 2019 11:19 am

whizzo wrote:
Fri Nov 15, 2019 3:40 am
I didn't even think about the fact that if I create a NISA I would still have to pay taxes to the US if I declare my US citizenship...
as a u.s. citizen, you are required to file taxes in the u.s. period. you have no choice in the matter, and it has nothing to do with whether or not you declare your u.s. citizenship.

TedSwippet
Posts: 2517
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Beginner - US/JP dual citizen in Tokyo

Post by TedSwippet » Fri Nov 15, 2019 3:02 pm

crre wrote:
Fri Nov 15, 2019 11:19 am
as a u.s. citizen, you are required to file taxes in the u.s. period. you have no choice in the matter, ...
Actually, deliberate noncompliance is a viable choice for some. If you have few or no ties with the US, no financial accounts there, no plans to live there in the future, and are a dual citizen with citizenship of the country you live in, you can pretty much carry on ignoring US tax laws with impunity.

This is especially true for people born abroad and who acquired US citizenship involuntarily from a parent. FATCA may cause problems if born in the US, but mostly this will amount to non-US banks refusing accounts to US citizens. In those cases, renunciation (cost $2,350) and obtaining a CLN would solve the problem. There is no requirement to be US tax compliant in order to renounce.

This course of action won't be for everyone. But it's definitely an option for some people. The looser a person's ties to the US, the more they resent their lives being controlled and regulated by what is to them an entirely foreign government.

bpp
Posts: 2017
Joined: Mon Feb 26, 2007 12:35 pm
Location: Japan

Re: Beginner - US/JP dual citizen in Tokyo

Post by bpp » Fri Nov 15, 2019 10:10 pm

TedSwippet wrote:
Wed Nov 13, 2019 7:59 am
Also, some detail in this wiki page: Investing in Japan for US citizens and US permanent residents - Bogleheads

( bpp, can you say if the information in this page remains up to date? Thanks. )
Hi TedSwippet

All still true as far as I know, though I am not following in detail anymore exactly what the full range of options is for US taxpayers in Japan, so some brokers may have changed their terms snd offerings since then. (Though if there have been changes, they are probably not for the better.)

I see that the section on US-domiciled ETFs directly tradable on the Tokyo stock exchange can be vastly contracted now, since the iShares JDFs were delisted leaving SPY as the sole remaining option. Not that useful all by itself, unless for some reason one were happy with that as one’s sole stock fund, which I suppose might conceivably work for someone who planned to return to the US in retirement. (Though in my experience, once immigrants to Japan get settled in enough to start thinking about investing, the fraction who ever do actually return to their countries of origin is amusingly small, no matter what their declared intentions were when they came here. Inertia is a powerful force.)

TedSwippet
Posts: 2517
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Beginner - US/JP dual citizen in Tokyo

Post by TedSwippet » Sat Nov 16, 2019 4:30 am

bpp wrote:
Fri Nov 15, 2019 10:10 pm
All still true as far as I know, though I am not following in detail anymore exactly what the full range of options is for US taxpayers in Japan, so some brokers may have changed their terms and offerings since then. (Though if there have been changes, they are probably not for the better.)
Good. Thanks for letting me know.
bpp wrote:
Fri Nov 15, 2019 10:10 pm
I see that the section on US-domiciled ETFs directly tradable on the Tokyo stock exchange can be vastly contracted now, since the iShares JDFs were delisted leaving SPY as the sole remaining option.
I'd noticed this (the "UPDATE: As of January 22, 2018, ..." sentence). The only reason I didn't take out the table when I split this off into its own page was that it seemed to reduce the page to something almost empty. Perhaps that's an accurate metaphor for the investing options for US citizens abroad now :-( . Also, as I'm not in Japan I'm not really qualified to do much to this page.

When you've a moment, would you mind just going over this and seeing if you can quickly identify any ways it could be more accurate. Or let me know if there are any edits besides removing the table that I can make. Thanks.

bpp
Posts: 2017
Joined: Mon Feb 26, 2007 12:35 pm
Location: Japan

Re: Beginner - US/JP dual citizen in Tokyo

Post by bpp » Sat Nov 16, 2019 6:46 am

Sure, will do.

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