NISA Explained: Japan's Tax-Free Investment Account for Foreign Residents

Last updated: October 2026

If you live in Japan, you've almost certainly heard the word "NISA", perhaps from a coworker who started investing, or from the ubiquitous ads at train stations and bank branches. NISA is Japan's tax-exempt investment program, and here's the thing many foreign residents don't realize: you don't need Japanese citizenship to use it. As long as you live in Japan and meet a few basic requirements, you can open a NISA account and invest completely tax-free.

In January 2024, the Japanese government rolled out the most significant overhaul of NISA since the program launched in 2014. The new system dramatically expanded investment limits, removed time restrictions on tax-free holding, and made the program far more powerful as a long-term wealth-building tool. Whether you're planning to stay in Japan for a few years or the rest of your life, understanding NISA should be a priority.

This guide covers what a foreign resident needs to know: the mechanics of the new system, eligibility, brokerage options, what happens when you leave Japan, the tax complications American citizens face, and the changes that take effect in 2027.

Disclaimer: This article is for informational purposes only and does not constitute investment, tax, or financial advice. Investment decisions should be made based on your individual circumstances. Please consult a qualified tax advisor or financial planner for guidance specific to your situation.

What Is NISA?

NISA stands for "Nippon Individual Savings Account," modeled after the UK's ISA (Individual Savings Account) system. Under normal circumstances, Japan levies a tax of approximately 20.315% on capital gains and dividends from investments. This breaks down to 15.315% income tax (including a reconstruction surtax) and 5% resident tax.

With a NISA account, that tax disappears entirely. If you invest ¥1 million and it grows to ¥2 million, that ¥1 million gain is yours to keep, with no tax owed. In a regular taxable account, you'd hand over roughly ¥203,150 of that gain to the government.

The program was introduced in 2014 to encourage household investment and shift Japan's notoriously savings-heavy personal finances toward greater market participation. It worked: NISA accounts have grown rapidly, and the 2024 reforms accelerated adoption even further.

The 2024 "New NISA" System

The 2024 overhaul transformed NISA from a modest tax break into a genuinely powerful investment vehicle. Here's how the new system works.

Two Investment Quotas

New NISA consists of two parallel investment tracks that can be used simultaneously, a major upgrade from the old system, which forced you to choose one or the other.

Tsumitate (Accumulation) Quota: Up to ¥1.2 million per year. This is limited to funds pre-approved by Japan's Financial Services Agency (FSA), primarily low-cost index funds and balanced funds designed for long-term wealth building. The emphasis is on regular, automated contributions rather than lump-sum investing.

Growth Investment Quota: Up to ¥2.4 million per year. This opens the door to a much wider range of products: individual stocks listed on Japanese exchanges, ETFs (both domestic and foreign-listed), REITs, and actively managed funds. Lump-sum purchases are allowed, giving you more flexibility in how and when you deploy capital.

Annual and Lifetime Limits

The combined annual investment cap is ¥3.6 million (Tsumitate ¥1.2M + Growth ¥2.4M). The lifetime tax-free holding limit is ¥18 million in total, of which no more than ¥12 million can come from the Growth quota. You could fill the entire ¥18 million through the Tsumitate quota alone, but the Growth quota is capped at ¥12 million.

A crucial detail: the ¥18 million lifetime limit is calculated on a book-value (acquisition cost) basis, not market value. If you buy ¥1 million worth of an index fund and it doubles to ¥2 million, only ¥1 million counts against your lifetime cap. Even better, if you sell an investment, that book value is freed up and becomes available again the following year. This "recycling" mechanism means the ¥18 million cap is less restrictive than it first appears.

Permanent Tax-Free Holding

Under the old NISA, the General NISA had a 5-year tax-free window, and the Tsumitate NISA had 20 years. Miss those deadlines and your investments would be bumped into a taxable account.

The new NISA eliminated time limits entirely. Once an investment enters your NISA account, it remains tax-free for as long as you hold it, whether that's 5 years or 50. This single change makes NISA dramatically more attractive for long-term investors.

Eligibility for Foreign Residents

NISA eligibility is based on residency, not nationality. If you live in Japan and meet the following criteria, you can open an account.

Residency Requirement

You must be a resident of Japan with a registered address. For foreign nationals, brokerages generally apply the residency test in the Foreign Exchange and Foreign Trade Act: you qualify from day one if you work at an office in Japan, and otherwise once you have been in Japan for six months.

Age Requirement

You must be 18 years or older as of January 1 of the year you open the account.

Required Documents

Residence Card (在留カード / Zairyū Card): Your valid residence card serves as the primary identification document.

My Number (マイナンバー): Japan's individual tax identification number, introduced in 2016. You'll need to provide either your My Number Card or your notification card paired with a separate photo ID. This is mandatory for all NISA account applications.

A Note on Account Opening for Non-Japanese Nationals

At some major online brokerages, foreign nationals cannot use the smartphone identity check and are asked to send documents by mail instead, which can add a few weeks. It is an inconvenience rather than a barrier. Procedures change, so check the brokerage's page for foreign nationals before you apply.

Popular Investment Choices

The Japanese NISA landscape is dominated by a small number of ultra-low-cost index funds. Two stand far above the rest in terms of popularity and asset accumulation.

eMAXIS Slim All Country (オール・カントリー): Managed by Mitsubishi UFJ Asset Management, this fund tracks the MSCI All Country World Index, providing exposure to roughly 50 countries. Its expense ratio of 0.05775% is among the lowest in the world for a global equity fund. Net assets were about ¥13.9 trillion at the end of August 2026, the largest of any publicly offered equity investment trust in Japan (excluding ETFs). Japanese investors call it "Orucan" (オルカン).

eMAXIS Slim S&P 500: Same fund family, tracking the S&P 500 index of major US companies. The expense ratio is 0.08140%. This is the go-to choice for investors who want concentrated exposure to the US market.

The overwhelming preference for these two funds reflects a broader trend in Japanese retail investing: low fees, broad diversification, and passive management. For most foreign residents, one or both of these funds will form the core of a NISA portfolio.

Choosing a Brokerage

For foreign residents, brokerage selection involves considerations that Japanese nationals rarely think about: English-language support, whether the brokerage accepts non-Japanese nationals, and critically, what happens to your account if you leave Japan.

SBI Securities

Japan's largest online brokerage by account numbers. It offers the widest product selection and rock-bottom fees. The downside for foreigners: the platform is Japanese-only, and foreign nationals may have to submit documents by mail. Since 2025, clients on an employer-directed overseas posting can keep domestic stocks, US stocks and investment trusts in NISA.

Rakuten Securities

The other giant of Japanese online brokerages. Its unique selling point is integration with Rakuten's loyalty point ecosystem: you can invest using Rakuten Points earned from shopping. Like SBI, it's Japanese-only. Since the end of 2024 it has let clients on overseas assignments keep investment trusts and foreign stocks in NISA, not only Japanese shares.

Interactive Brokers Japan (IBSJ)

IBSJ, the Japanese arm of Interactive Brokers, started offering NISA accounts in July 2025. Its platform is in English and gives direct access to US-listed stocks and ETFs as well as Japanese stocks and funds. Other large brokerages also sell US-listed ETFs in the Growth quota, but IBSJ is the obvious choice if you want to manage everything in English. Many US citizens end up here for that reason; see the US citizens section below.

Nomura Securities

Japan's legacy full-service brokerage. While online tools are less sophisticated than SBI or Rakuten, Nomura offers branch-based support where staff can walk you through procedures in person. Nomura also supports NISA account continuation for clients posted overseas.

What Happens When You Leave Japan

This is arguably the most important NISA topic for foreign residents. Your plans for eventually leaving Japan should shape your NISA strategy from day one.

The Default: Account Closure

When you cease to be a Japanese tax resident, typically when you deregister your address and leave the country, your NISA account is closed by default. Your holdings are transferred to a regular taxable account (tokutei kōza or ippan kōza). Importantly, you are not taxed on unrealized gains at the point of transfer. Tax liability only arises when you eventually sell.

The Exception: Continuation Application

If you're leaving Japan due to an employer-directed overseas transfer, you can submit a Continuation Application (継続適用届出書 / keizoku tekiyō todokesho) through your brokerage to the tax office before your departure. This allows you to maintain your NISA account for up to five years while abroad. During this period, no new purchases are allowed; you can only hold existing investments.

This exception applies specifically to work transfers directed by your employer. Voluntary moves, personal relocation, or job changes that take you out of Japan do not qualify. Brokerages usually also require you to appoint a standing agent (常任代理人) in Japan to handle account matters on your behalf; this is separate from the tax agent (納税管理人) you may need for the tax office.

Not all brokerages support continuation, and the product scope varies among those that do. This makes brokerage selection a critical decision for anyone who anticipates a possible departure.

Critical Considerations for US Citizens

American citizens and green card holders face a unique and significant complication when using NISA: the PFIC (Passive Foreign Investment Company) rules.

The PFIC Problem

Under US tax law, Japanese investment trusts, including the wildly popular eMAXIS Slim funds, are classified as PFICs. Income from PFICs is subject to punitive US taxation that can result in effective tax rates far exceeding ordinary rates. The IRS designed these rules specifically to discourage Americans from investing in non-US funds.

The practical consequence: the entire Tsumitate quota becomes unusable for US citizens, because every eligible product is a Japanese-domiciled investment trust and therefore a PFIC. Even though Japan exempts NISA gains from tax, the US does not recognize foreign tax exemptions, so you still owe US tax on worldwide income.

The Workaround: US-Domiciled ETFs in the Growth Quota

The solution is to use the Growth quota to invest in US-domiciled ETFs, which are not PFICs. Broad market ETFs like Vanguard Total World Stock (VT) or Vanguard S&P 500 (VOO) provide similar global or US market exposure to their Japanese fund equivalents, without triggering PFIC complications.

US-listed ETFs can be bought in the Growth quota at most large online brokerages, including SBI, Rakuten, Monex and Mitsubishi UFJ eSmart, and at IBSJ since July 2025. Before opening an account, confirm that the brokerage accepts US persons. IBSJ adds an English interface, which matters if you will be reading tax statements and trade confirmations yourself.

FATCA and FBAR Obligations

Regardless of NISA's tax-free status in Japan, US citizens must report foreign financial accounts. FBAR (FinCEN Form 114) filing is required if the aggregate value of your foreign accounts exceeds $10,000 at any point during the year. FATCA (Form 8938) has higher thresholds but similar reporting obligations. NISA does not exempt you from these requirements.

NISA vs. iDeCo

Japan's other major tax-advantaged investment vehicle is iDeCo (individual-type Defined Contribution pension plan). iDeCo offers a powerful benefit that NISA doesn't: contributions are fully tax-deductible from your income, reducing your current tax burden.

The catch is that iDeCo funds are locked until age 60. For foreign residents who may leave Japan before then, this creates a serious liquidity risk. While procedures exist for early withdrawal by non-residents, they're complex and may result in unfavorable tax treatment.

For most foreign residents, NISA is the better starting point. It offers complete flexibility: you can sell and withdraw at any time with no penalties. Once you have a clearer picture of your long-term plans in Japan, adding iDeCo can make sense for the additional tax benefits.

What Changed in 2026, and What Starts in 2027

The 2026 tax reform, enacted by the Diet in 2026, leaves the headline numbers alone. The ¥3.6 million annual cap, the ¥18 million lifetime cap and the unlimited holding period stay exactly as described above. What changes is who can use the Tsumitate quota and what it can hold.

Children Get Their Own Tsumitate Quota (January 2027)

The age requirement for the Tsumitate quota is abolished from January 2027. Residents aged 0 to 17 can hold a children's Tsumitate account with a ¥600,000 annual limit and a ¥6 million lifetime limit, managed by a parent or guardian. Only Tsumitate-eligible funds can be bought, through regular purchases. From age 12, money can be withdrawn if it is spent on the child and the child agrees in writing. At 18 the account moves into the adult Tsumitate quota automatically, and the ¥6 million sits inside the adult ¥18 million cap rather than on top of it. Major brokerages, including SBI, Monex, Matsui and Mitsubishi UFJ eSmart, began taking applications on October 1, 2026.

For foreign families the residency logic is the same as for adults: the child has to be a Japanese resident. If your child is a US citizen, the children's quota has the same problem as the adult Tsumitate quota, because every eligible product is a Japanese investment trust and therefore a PFIC.

A Wider Tsumitate Menu

In April 2026 the FSA added two Japanese equity indices, the Yomiuri Stock Index (Yomiuri 333) and the JPX Prime 150, to the list of indices that Tsumitate index funds may track. The reform also lets non-index funds qualify if they invest mainly in stocks or bonds; until now the rule required stocks. The aim is to bring bond-heavy and balanced funds into the quota for people who want less volatility.

One Less Letter From Your Brokerage

Brokerages have had to confirm each NISA holder's name and address ten years after the account was opened, then every five years, and to freeze new purchases if they could not. The reform abolishes this periodic check. Brokerages will instead follow up on address changes through their own procedures, so keep your registered address current.

The Old NISA System

If you had a NISA account before 2024, your old holdings remain in a separate "old NISA" bucket. They cannot be rolled over or transferred into the new NISA framework. Old General NISA investments (¥1.2 million/year cap, 5-year tax-free window) and old Tsumitate NISA investments (¥400,000/year cap, 20-year window) will continue under their original terms until their respective tax-free periods expire, at which point they automatically transfer to taxable accounts.

The good news: your new NISA's ¥18 million lifetime limit is completely separate from whatever you invested under the old system.

Key Takeaways for Foreign Residents

NISA is one of the most accessible and powerful tax-advantaged investment tools available to anyone living in Japan. With ¥3.6 million in annual investment capacity, an ¥18 million lifetime limit and permanent tax-free treatment, the 2024 reforms make it genuinely world-class.

For foreign residents specifically, three strategic considerations should guide your approach. First, choose your brokerage carefully: the right choice depends on your language needs, nationality, and whether you might leave Japan. Second, understand the departure rules before you invest, not after, because the continuation application is only available for employer-directed transfers. Third, if you're a US citizen, the PFIC issue is not optional to understand; it fundamentally shapes which products you can invest in and which brokerage you should use.

Done thoughtfully, NISA can be a cornerstone of your financial strategy while living in Japan. Take the time to understand the rules, pick the right brokerage, and build a portfolio aligned with both your investment goals and your life plans.

This article is for general informational purposes only and does not constitute investment, financial, or tax advice. Please consult a qualified professional for guidance tailored to your individual circumstances.