9 Jan 2014
Will Japan's new tax-free accounts stimulate risk appetite?
FXstreet.com (Bali) - Will Japan’s household wealth be finally put to work in riskier assets? The set-up of the Nippon Individual Saving Accounts or NISA, officially established on Monday, is a tax-free system designed to stimulate Japanese savers on taking braver.
As Bradford Frischkorn from the WSJ reports: "The potential benefits of the NISA system could be profound. Japan boasts more than $16 trillion in household wealth, but only about 8% of that is exposed to stocks — compared with 30% for the United States." Due to a heavy advertising campaign, the NISA accounts have gained plenty of popularity, Bradford suggests.
According to Yujiro Goto, FX Strategist at Nomura Securites, Japan's largest broker: "Nikkei reported on 3 January that the number of NISA accounts reached around 4.0 million in late December and 250k more accounts will be created soon. These numbers are based on only six banks and 20 brokers and thus, the actual number is likely to be bigger."
"Nonetheless, the article suggests the number of new accounts under NISA is likely to be fewer than we expected but considering improving NISA to encourage more investment, and we expect the number of NISAs to keep increasing gradually", Goto added.
Nomura has been performing more than 1,000 webinars across the country in order to educate the population on the benefits of holding a NISA accounts.
As Frischkorn explains, "the accounts have strict limits, as each has a maximum limit of ¥5 million ($48,000), with only ¥1 million investable per year. Any additions or profits over these thresholds are subject to full taxation. Japan’s capital gains tax doubled this year to 20% from 2013, making tax-free accounts sound even more attractive to would-be investors."
While some Analysts appear to be optimistic over the prospects of risk-on follow through in stocks - Yen negative - , on the basis that further NISA account creations could see significant increase in buying participation, there are others more skeptic about how much difference the new NISA accounts would really make, with Deutsche Bank Economist Mikihiro Matsuoka, being cited by the WSJ, saying "any new shift of funds to stocks and investment trusts induced by NISA will come to only about several trillion yen per year — a minuscule amount, - given that the majority of cash in defined contribution plans (401k), a similar tax-free investment scheme, is invested in principal-guaranteed products, NISA will have even less of an impact.”
As Bradford Frischkorn from the WSJ reports: "The potential benefits of the NISA system could be profound. Japan boasts more than $16 trillion in household wealth, but only about 8% of that is exposed to stocks — compared with 30% for the United States." Due to a heavy advertising campaign, the NISA accounts have gained plenty of popularity, Bradford suggests.
According to Yujiro Goto, FX Strategist at Nomura Securites, Japan's largest broker: "Nikkei reported on 3 January that the number of NISA accounts reached around 4.0 million in late December and 250k more accounts will be created soon. These numbers are based on only six banks and 20 brokers and thus, the actual number is likely to be bigger."
"Nonetheless, the article suggests the number of new accounts under NISA is likely to be fewer than we expected but considering improving NISA to encourage more investment, and we expect the number of NISAs to keep increasing gradually", Goto added.
Nomura has been performing more than 1,000 webinars across the country in order to educate the population on the benefits of holding a NISA accounts.
As Frischkorn explains, "the accounts have strict limits, as each has a maximum limit of ¥5 million ($48,000), with only ¥1 million investable per year. Any additions or profits over these thresholds are subject to full taxation. Japan’s capital gains tax doubled this year to 20% from 2013, making tax-free accounts sound even more attractive to would-be investors."
While some Analysts appear to be optimistic over the prospects of risk-on follow through in stocks - Yen negative - , on the basis that further NISA account creations could see significant increase in buying participation, there are others more skeptic about how much difference the new NISA accounts would really make, with Deutsche Bank Economist Mikihiro Matsuoka, being cited by the WSJ, saying "any new shift of funds to stocks and investment trusts induced by NISA will come to only about several trillion yen per year — a minuscule amount, - given that the majority of cash in defined contribution plans (401k), a similar tax-free investment scheme, is invested in principal-guaranteed products, NISA will have even less of an impact.”