Japan revamped its NISA tax-free stock investment program for individuals on Monday, reinforcing the country's efforts to encourage a shift from savings to investments in the equities market.
The new Nippon Individual Savings Account program expands annual investment limits and extends the tax-exempt period from up to 20 years to an indefinite term.
The reform reflects "the new form of capitalism" advocated by Prime Minister Fumio Kishida, as he aims to double financial assets held by Japanese households, which kept about half of their some 2,100 trillion yen ($15 trillion) worth of assets in cash as of September.
Introduced in 2014 and modeled after Britain's Individual Savings Account system, the NISA program enables investors to trade stocks and investment trusts through dedicated accounts at financial institutions.
Under the new framework, growth and "tsumitate," or savings, NISA will be introduced instead of the previous general and tsumitate NISA programs.
Previously, general NISA accounts allowed investments of up to 1.2 million yen annually in domestic and foreign equities, exchange traded funds and real estate investment trusts, while tsumitate accounts tailored for long-term mutual funds had a 400,000 yen cap.
Both types provided income tax exemptions from Japan's 20 percent capital gains tax, valid for five years for general NISA and 20 years for tsumitate NISA.
Under the revised framework, the overall annual investment ceiling subject to tax exemption is now set at 3.6 million yen, with the growth investment quota capped at 2.4 million yen.
In addition, individuals can hold up to 18 million yen across their NISA accounts, with permanent tax-exempt status, a drastic revision from the previous time-bound exemptions.
Another update to the system is the flexibility to reuse investment quotas after selling assets, a feature not available in the old NISA.
In Japan, only about 18 percent of household financial assets were held in stocks and investment trusts as of the end of September, according to Bank of Japan data released in December.
In 2022, the government set goals to double the number of NISA accounts and their purchases to 34 million and 56 trillion yen, respectively, within five years.
