Japan is set to boost limit on tax-free investment accounts

JAPAN will increase the annual limit on tax-free investment accounts and expand the amount that people may invest over a lifetime to 18 million yen (S$176,976), according to documents seen by Bloomberg.

The revamped Nisa system will allow investments of up to 1.2 million yen a year on instalment accounts, triple the previous limit. It will double the maximum amount on other accounts to 2.4 million yen in changes that take effect in January 2024. Use of both types of account at once will be permitted, and existing time limits on tax exemptions will also be abolished, according to the documents.

The move is part of Prime Minister Fumio Kishida’s bid to double people’s incomes from financial assets, in an ageing country where many tend to opt for savings over riskier investments. A shift in the roughly 2 quadrillion yen of household assets could also buoy the stock market and help financial firms.

Japanese households had about 54 per cent of their financial assets in cash and deposits as of the end of March, and only about 10 per cent in stocks, according to Bank of Japan data. That contrasts with the US, where about 40 per cent of financial assets were in equities, and the euro area, where almost 20 per cent was in stocks.

Kishida had announced the expansion of the Nisa system, which is based on the UK’s Individual Savings Accounts, in a speech in London in May. BLOOMBERG