Surge in NISA Investment Trusts as Japanese Investors Seek Higher Returns

At a recent event hosted by an online brokerage in Tokyo, an asset management firm showcased investment trusts eligible for the NISA program. This initiative, designed to encourage investment in mutual funds that focus on global stocks, saw small-lot investors in Japan committing trillions of yen under a new tax-exemption regimen that launched just a year ago.

An Asahi Shimbun survey revealed that the leading five investment funds, which primarily mirror benchmark global or U.S. stock indices, represented around one-third of the approximate 11.8 trillion yen ($75 billion) invested through 10 different securities firms in the first 11 months of 2024. This demand has been spurred by the updated NISA program that began in January the previous year, allowing for tax-free investments in various financial instruments like investment trusts and stocks.

The survey took into account five notable securities houses, including Nomura Securities and Daiwa Securities, along with several online brokerage firms. It was reported that purchases made under the NISA initiative amounted to 11.8 trillion yen, with the top five investment trusts alone contributing about 4 trillion yen, or 33 percent, of the total.

Among the standout products were two offerings from Mitsubishi UFJ Asset Management Co.’s eMAXIS Slim series, which attracted over 3.3 trillion yen combined. One of these products is designed to replicate the performance of a global stock index, while the other is linked to the S&P 500 index of major U.S. companies.

the Tsumitate Quota, which allows monthly investments in around 300 investment trusts, and the Growth Quota, which accommodates stock purchases or investments in about 2,300 trusts, ETFs, and REITs. Instruments that focus primarily on overseas markets, which generally offer higher returns and lower commissions, have garnered considerable popularity among investors.

The data further highlighted a trend among younger investors, particularly those in their teens to 40s, with all of the ten most-purchased investment trusts being linked to overseas stock performance. Although investment trusts tied to foreign assets are influenced by currency fluctuations, with their value rising or falling based on the strength of the yen, they have still proven attractive in the long run.

Under the NISA framework, individuals aged 18 and older can invest up to 3.6 million yen annually, with a lifetime cap of 18 million yen and enjoy the benefit of tax exemptions for their returns.