Before you continue reading I assume that you are a resident in Japan as you will have to submit proof of residency when opening up a brokerage account with a Japanese broker. When I was looking to open up an account a few years ago, I was surprised by the lack of online information in English so I hope some people find this content useful. You will still need to have some level of understanding of Japanese in order to navigate the registration forms; unfortunately a lot of the information is still in Japanese.
This may sound like a slight digression but if you are based in Japan as an expat it’s very likely that you will have been contacted by private advisers soliciting you to open up a retirement account with them. While I could see why certain people might benefit from their services, if your aim is to invest whilst minimising costs and you intend to stay in Japan for a while I would personally stay away.
Selecting a Broker
Firstly, you will need to choose from one of the many Japanese online brokerage firms, the so called ネット証券 (Netto Shoken) which are widely used by retail investors as their fees are very competitive. Their offerings are all quite similar based on what I’ve seen. Their products range from individual stocks, FX, options and futures, bonds and commodities. Below is a list of some of the most popular firms:
I also came across the below website that ranks these companies based on different metrics (please note that the website is in Japanese):
Having done my own research I opted for SBI Securities which has a good balance between low fees and positive client feedback. Although this is a very rough overview, these are the steps involved in opening up an account.
1) Fill out the online application form. You will need to provide your personal details such as your “My Number” info for tax purposes, personal address and documents (Passport, Residence Card, Insurance Card). You will also need to go through the terms and conditions and provide some details regarding your current occupation and investment experience. Filling out the form can take from 5-30 minutes. If you are employed, I assume that you have done your own research to ensure that you are not in breach of company policy. If you are not sure I would strongly recommend checking with your internal compliance team.
2) If you filled out your form correctly and your application was successful, you will get confirmation via post and a request to provide paper scans of documents such as your passport and My Number Card. Once you post the required information your account should be active within 3-4 business days.
3) Now that your account is active you need to transfer money in and this can be done in several ways. Many of the online brokers also offer banking services so you could open a bank account with them and transfer funds between your bank account and brokerage account. You can even ask them to issue a cash card (see below picture) that will allow you to deposit and withdraw money via ATM machines at convenience stores.
Opening a NISA (Nippon Individual Savings Account)
If you have gone through the above steps you should definitely also open up a NISA. This is the Japanese equivalent of a stock ISA in the UK. The account allows you to invest up to 1,200,000 JPY tax free in a single tax year. The amount that you invest will be tax free for 5 years meaning that if you keep investing the maximum amount for 5 years you will end up with 6,000,000 (5*1,200,000) in a tax sheltered account. This is what they call a 一般(General) NISA. The second type of NISA is a 積立 (Periodic Investment) NISA, which allows you to invest 400,000 JPY per year but extends your tax exemption period to 20 years.
SOURCE: Japanese FSA
Investments that are not part of your NISA will be subject to taxes and your broker will give you two options: the first option is to keep your investments in a “Special Account” (特定口座). I strongly recommend this as you will not have to go through the hassle of filing out a tax return (確定申告). Instead your taxes will be automatically deducted from your trading platform. Dividends paid into this account will therefore be paid net of tax. The other option instead is to use a “General Account 一般口座” where any gains and dividend/interest payments will be paid pretax, however you will need to declare this source of income in your yearly tax return form.
I am not affiliated with any of the companies that I mentioned in this article. Please invest responsibly. Investment returns can fluctuate and I cannot be held responsible for any losses.