Soon you can invest tax-free for your kids
In 2027, the Japanese government will start the new 子供 (junior) NISA scheme
Disclaimer: I am a retail investor, not a tax accountant. Tax laws in Japan are subject to change.
The Japanese government is finally expanding the NISA system to minors (ages 0–17). Unlike the adult version, this is a restricted account designed strictly for long-term accumulation.
Launch Date: January 1, 2027.
Annual Investment Limit: ¥600,000 (approx. ¥50,000/month).
Lifetime Tax-Free Limit: ¥6,000,000 per child.
Account Type: Tsumitate Quota Only. You cannot buy individual stocks (Growth Quota is for adults only).
Lock-Up Period: Withdrawals are restricted until the child turns 12 years old. This prevents parents from using the tax break for short-term consumption.
The Strategy: A “Barbell” Approach for Families
Since the child’s account is restricted to the Tsumitate Quota (mutual funds), you cannot execute stock picking or high-dividend strategies directly in their name.
You must split your strategy across the two account types:
A. The Parent’s Account (Growth Quota)
Goal: Yield and Undervalued Assets.
Strategy: Use your ¥2.4 million Growth Quota to buy individual Japanese stocks.
Why: You need the tax shelter for dividends.
B. The Child’s Account (Tsumitate Quota)
Goal: Compounding Growth.
Strategy: Since you cannot pick stocks, buy the broadest, lowest-cost index fund available.
Why: A child has an 18+ year horizon. Indices historically outperform cash and inflation over 20-year periods. Do not get cute with “smart beta” or active funds here, the fees will eat the returns.
How to Set It Up
Step 1: Choose the Right Broker. Open the account with Rakuten Securities or SBI Securities.
Rakuten: Best for integration with Rakuten Bank and earning points.
SBI: Slightly wider fund selection, but the interface is dated.
Step 2: Prepare Documents You cannot open a Japanese securities account without these. If you lack them, apply at your ward office immediately.
My Number Card (Plastic Card): Mandatory. The paper notification slip is rarely accepted anymore.
Residence Card (Zairyu Card): For foreign residents.
Child’s Bank Account: The money must flow from an account in the child’s name. You cannot debit directly from the parent’s bank account to the child’s NISA.
Step 3: Managing Gift Tax (Critical) You are gifting money to your child to invest. Japan has a ¥1.1 million annual gift tax exemption.
The Rule: The NISA limit is ¥600,000. This fits comfortably within the ¥1.1M exemption.
The Trap: Do not set up an automatic transfer for 10 years. The tax office (NTA) may view a contract for “¥600k/year for 10 years” as a single lump-sum gift of ¥6 million, taxing you immediately.
The Solution: Transfer the cash manually to your child’s bank account each year. Treat it as a fresh gift every time.
My Verdict
The restriction on withdrawals until age 12 is actually a benefit, it forces discipline.
My Advice:
Wait for 2027: Do not open a taxable account for your child now if you plan to move those funds to NISA later; selling to transfer triggers taxes. Keep the cash in high-yield savings until Jan 1, 2027.
Max Out the Parents First: Prioritize filling your own ¥3.6 million annual NISA limits before funding the child’s. Your Growth Quota offers better freedom for value investing.
Keep it Boring: Use the child’s account for the boring, reliable growth engine (indicies). Use your own account for the fun, high-conviction value plays.