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03/04/2023 Article
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Katsutoshi Takehana

NRI

Group Manager, Financial Market & Digital Business Research Department

Plan to double asset-based income addresses long-standing issues

The Kishida Government released a plan to double household’ asset-based income at a November 28, 2022, meeting of its New Capitalism Council). The plan comprises seven planks, two of which have attracted the lion’s share of attention: an overhaul of Nippon Individual Savings Accounts (NISA) and a plan to upgrade financial/economic education.

The NISA overhaul will rectify three shortcomings dating back to NISAs’ inception. Specifically, it will simplify NISAs, eliminate time limits on NISA investment returns’ tax-exemptibility and raise annual and lifetime limits on tax-exempt investment amounts. The government has proposed a new type of NISA with a lifetime tax- exempt investment limit of ¥18mn, a threefold increase from regular NISAs’ current limit of ¥6mn. Additionally, the government has set five-year targets to double (1) the number of NISAs from 17mn to 34mn and (2) risk assets held in NISAs from ¥28trn to ¥56trn (acquisition cost basis). These five-year KPI targets should set in motion an effective PDCA (plan-do-check-act) cycle for the policy agenda aimed at transforming the Japanese public from savers to investors, though it would be better to set longer-term targets also. The goal of turning Japan into a nation of investors will allow households to broadly benefit from corporate and economic growth through ownership of equities and investment trusts. If such broad sharing of economic benefits is to be realized, the government’s target of 34mn NISA holders is obviously not the ultimate endpoint. The government should present a vision of the final outcome it is targeting.

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