Saving and investing: your first NISA

Do the urgent things first: your address, health insurance, phone and bank account. Then build a cushion of savings in your bank account for emergencies, such as several months of living costs, before you put money into investments, which can fall in value and are harder to get at quickly.

A NISA is not urgent, but its benefit grows with time, so many people open one within their first year. If you do not expect to stay in Japan, read the last section first.

A NISA is opened at a Japanese broker or at a bank that offers it. You will need your residence card with your registered address, your My Number and a Japanese bank account. You must be 18 or over and a resident of Japan on 1 January of the year you open it. Most brokers let you apply online for the brokerage account and the NISA together.

The tax office checks each NISA application, which can add a week or two to the usual one to three weeks for opening an account. You can have a NISA at only one financial institution in any one year.

The easiest way to start is the tsumitate frame, where a set amount goes from your bank account into a fund every month. Some brokers accept as little as ¥100 a month. A fixed monthly amount is simple to keep up and takes the guesswork out of when to buy.

The funds you can choose in this frame are limited to ones that meet government conditions for low costs and long-term investing. Before choosing one, check what it holds, its annual fee and whether it is hedged against the yen.

Gains and dividends inside a NISA are tax-free, and you do not need to report them. In a normal brokerage account the tax is 20.315%, which the broker takes at source if you choose a withholding account. NISA losses cannot be set against gains in other accounts.

A NISA does not change your public pension or health insurance. Those are separate, and are explained in the health insurance and pension guide.

A NISA is for residents of Japan. Brokers have strict procedures for people who move abroad, and you generally cannot keep buying into a NISA while you live overseas. What happens to the account depends on its type and your new country, so contact your broker before you leave, not after.

This matters more for people on short stays. If you will probably leave within a few years, a NISA can still make sense, but keep it simple and know the exit rules in advance.