Investing from Japan
This page suggests some approaches and funds that enable a Japanese investor to invest by applying the Bogleheads investment philosophy.
If you live in Japan and you are a US citizen or US permanent resident (green card holder), see Investing from Japan for US citizens and US permanent residents instead.
Index funds in Japan
Stock index funds
Indices available include:
- TOPIX: capitalization weighted index covering ~90% of the capitalization of the companies traded on the Tokyo Stock Exchange. This is the closest common index to a total domestic stock index.
- Nikkei 225: Price-weighted (like the Dow 30) index of large companies in Japan.
- MSCI All-world ex-Japan
- MSCI Kokusai: Developed world ex-Japan
- MSCI Emerging Markets
Expense ratios are generally higher for the older funds, especially the traditional mutual funds (投資信託), and are lowest for the newer ETFs (上場投資信託). The lowest expense ratio fund is the MAXIS TOPIX ETF (MAXIS トピックス上場投信), Code 1348 on the Tokyo Stock Exchange, with an expense ratio of 0.08%.
The following Vanguard ETFs are also available through certain Japanese brokers:
|Vanguard Total World Stock Index||VT||0.17%|
|Vanguard FTSE All-World (ex-US) Small-Cap Index||VSS||0.19%|
|Vanguard MSCI Emerging Markets Index||VWO||0.15%|
|Vanguard Total (US) Stock Market Index||VTI||0.05%|
|Vanguard S&P500 (US) Index||VOO||0.05%|
|Vanguard Small Cap (US) Index||VB||0.09%|
|Vanguard MSCI Pacific Index||VPL||0.12%|
|Vanguard MSCI Europe Index||VGK||0.12%|
|Total (US) Bond Index||BND||0.07%|
The brokers officially offering the above funds are: Rakuten, SBI, Monex and Nomura.
Bond index funds
The domestic bond fund with the lowest expense ratio is the Mitsubishi-UFJ Domestic Bond Index Fund (三菱UFJ 国内債券インデックスファンド), with an expense ratio of 0.37%.
The cheapest foreign bond index fund is the Markit iBoxx ABF Pan-Asia Index ETF (Code 1349), with an expense ratio of 0.19%. The Citigroup Nonyen World Government Bond Index ETF (Code 1677) has an expense ratio of 0.25%, and the Barclays Emerging Markets Local Currency Government bond index ETF (Code 1566) has an expense ratio of 0.45%. Foreign bond index funds are generally unhedged.
Japanese savings bonds (個人向け国債) and regular Japanese government bonds (JGBs) can be purchased at banks, brokerages, and the post office. Note that some banks charge a maintenance fee to hold savings bonds and JGBs; there is no fee to hold them at the post office.
There are no inflation-adjusted Japanese government bonds available to the individual investor.
Individual foreign government bonds are also available at many brokerages.
Japan taxes residents on their world-wide income. If you are a Japanese citizen or permanent resident living in Japan, you will have to report all your overseas income to the National Tax Agency (NTA). You also have to pay Japanese taxes on world-wide income even if you are neither of the above, but have lived in Japan for 5 years or more.
When investing through a Japanese broker, it is recommended to use a "Tokutei Kouza" (特定口座), which is a type of brokerage account that automatically calculates and pays your Japanese taxes on capital gains on stocks, eliminating the need to file a tax return just to declare your capital gains. (Note: there is no capital gains tax on bonds through 2015.)[note 2]
Nippon Individual Savings Accounts (NISA)
Starting in January 2014, it is possible to invest in a tax-exempt investment account called the Nippon Individual Savings Account (NISA). This account is modelled after the UK ISA account, and in US terms somewhat resembles the Roth IRA. Contributions made in any one year are made after-tax, with all dividends and capital gains being tax-free for the next five years. An individual may invest up to 1,000,000 yen each year. Each year's "slice" comes back out of the NISA after 5 years, so the maximum contribution one can have invested at any one time is 5,000,000 total, 5 years' worth of contributions. The NISA program is currently scheduled to run for 10 years.[note 3][note 4]
- For some practical details, see forum discussion, ETF / Mutual Fund in Japan
- For a general guide on Japanese tax filing issues, refer to the forum discussion, Filing Japanese tax returns (確定申告)
- There is short overview of the features of NISA accounts here: To NISA or not to NISA? (Morgan McKinley)
- There is some discussion of NISA accounts in the following forum discussion: Living in Japan - Offshore Insurance Wrapper?
- RetireWiki.jp - an English-language wiki covering all aspects of long-term residence and retirement in Japan.
- Japanese Morningstar
- Vanguard Japan
- Japanese savings bonds (Ministry of Finance)
ETFs trading on the Tokyo Stock Exchange: