Introduction: If You're Not Using the New NISA, You're Leaving Compound Interest on the Table
In January 2024, Japan overhauled its NISA (Nippon Individual Savings Account) program in the most significant expansion since the system was created. Non-taxable holding periods became permanent, annual investment limits nearly tripled, and the two account types can now be used simultaneously.
Then in 2026, a second wave of reforms takes effect — minors can now open accounts, bond funds are added, and the tax-free allowance recovery timing is improved.
If you live or work in Japan, this guide covers everything you need to know about both rounds of changes.
Part 1: The 2024 New NISA — 5 Core Changes
Before vs. After
| Feature | Old NISA (pre-2024) | New NISA (2024+) |
|---|---|---|
| Non-taxable holding period | Tsumitate: 20 yrs / General: 5 yrs | Unlimited |
| Annual limit | Tsumitate ¥400K or General ¥1.2M (not both) | Tsumitate ¥1.2M + Growth ¥2.4M = ¥3.6M |
| Lifetime cap | Tsumitate ¥8M / General ¥6M | ¥18M |
| Use both tracks simultaneously | ❌ No | ✅ Yes |
| Reclaim allowance after selling | ❌ No | ✅ Following year (from 2026: same year) |
Change 1: Unlimited Non-Taxable Holding
This is the most important change. Under the old system, your tsumitate NISA expired after 20 years — forcing you to sell or transfer assets even if the market was down at the time.
Now you can hold indefinitely. No more forced selling during a crash.
Change 2: ¥3.6M Annual + ¥18M Lifetime Limit
- Tsumitate track: ¥1.2M/year (max ¥100K/month)
- Growth track: ¥2.4M/year (for individual stocks, ETFs, more active funds)
- At full speed: you can fill the lifetime cap in just 5 years
- Most salaried workers will take 10-20 years to fill it — which is fine. Start now.
Change 3: Both Tracks at Once
You no longer have to choose between the accumulation and growth tracks. Use both simultaneously:
- Tsumitate track: Low-cost global index funds on auto-invest
- Growth track: Dividend stocks, sector ETFs, or more active strategies
Change 4: Allowance Recovery After Selling
When you sell holdings, the purchase cost (book value) is recovered as available allowance the following year.
⚠️ Important: Only the original investment amount is recovered — not the profit.
Part 2: The 2026 Reforms — Three New Changes
Reform 1: Minors (Under 18) Can Now Use the Tsumitate Track
| Item | Details |
|---|---|
| Eligible | Under 18 (account opened by parent/guardian) |
| Annual limit | ¥600K/year |
| Lifetime limit | ¥6M |
| Withdrawal age | 12 and older (with the child's consent) |
Starting from birth and investing ¥600K/year (¥50K/month), you hit the ¥6M lifetime cap in 10 years. At a 5% annual return (consistent with long-term global equity averages), the account could grow to approximately ¥8.4-9M by age 18 — enough to cover university tuition, study abroad, or serve as a head start for adult life.
Note: The old Junior NISA (¥800K/year, locked until age 18) was abolished in 2023 due to extremely low utilization. The new system addresses the main complaint by allowing withdrawals from age 12.
Reform 2: Bond Funds Added to Tsumitate Track
Old rule: Funds in the tsumitate track must have a stock ratio above 50%.
New rule: Bond-heavy funds are permitted if they contain any equity component.
As Japan's central bank continues its gradual rate hike cycle (2024-2025), bonds have become more attractive. Multi-asset or balanced funds with higher bond allocations can now be held in the tax-free accumulation track.
⚠️ Monthly dividend funds (毎月分配型) remain excluded — their nature of distributing income in ways that erode principal is incompatible with NISA's long-term accumulation philosophy.
Reform 3: Same-Year Allowance Recovery
Under the current rule, when you sell NISA holdings, the allowance (at purchase price) recovers on January 1st of the following year.
From 2026: recovery happens within the same calendar year.
Practically, this only affects people who have already hit the ¥18M lifetime cap. Most investors won't reach that point until 2029 at the earliest (at full ¥3.6M/year). Still worth knowing for long-term planning.
Part 3: Common Misconception — Can You "Switch" Funds in NISA Like iDeCo?
A widespread claim online is that "2026 NISA allows switching (スイッチング) like iDeCo." This is incorrect.
| iDeCo Switching (Real) | NISA 2026 Reform | |
|---|---|---|
| What it is | Directly exchange one holding for another | Sell → allowance recovers in same year → re-buy |
| Execution gap | None (simultaneous) | Sell and buy-back are separate transactions |
| Profit handling | Entire value (including gains) switches | Only purchase cost is recovered; gains don't |
| Annual limit impact | Switching doesn't count against contribution limits | Still subject to ¥3.6M annual cap |
Bottom line: If active rebalancing is important to you, iDeCo is the better tool. NISA is designed for buy-and-hold strategies.
Part 4: What to Do Right Now
Start immediately — don't wait for the 2026 reforms
The 2024 NISA is already excellent. Every year you wait is a year of compound growth you can't recover. The 2026 changes will improve future flexibility — but they don't change the fact that the best time to start was yesterday, and the second best is today.
Plan ahead for your children's NISA (act in 2026)
When the minor NISA track opens in 2026, open an account for your child as soon as possible. Starting at ¥50K/month with a low-cost global equity index fund is a straightforward approach. Flexibility to withdraw from age 12 makes this a practical education savings tool, not just a locked-up account.
Don't let "not enough to max out" stop you
| Annual contribution | Years to fill ¥18M cap |
|---|---|
| ¥3.6M (maximum) | 5 years |
| ¥1.2M (¥100K/month) | 15 years |
| ¥600K (¥50K/month) | 30 years |
Whether you can invest ¥30K or ¥300K per month, starting now beats waiting until you can "do it properly." Compound interest rewards early starters, not perfect ones.
Conclusion
Japan's new NISA is one of the most generous tax-free investment vehicles available to ordinary individuals — anywhere. The 2026 reforms extend its utility to family-level wealth planning.
The only way to lose with the new NISA is to not use it.
Sources: Financial Services Agency (FSA) / soico.jp / NRI Kiuchi Nobuyuki column / Cabinet Decision of December 26, 2025
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