Tokyo December 13 2022: Japan is set to increase the annual limit on tax-free investment accounts aimed at the middle classes and raise taxes on ultra-wealthy individuals, as Prime Minister Fumio Kishida pursues his agenda of fairer distribution of the fruits of growth.
The revamped NISA tax-exempt system will expand the amount that people may invest over a lifetime to ¥18 million ($131,000), according to documents seen by Bloomberg. It would allow investments of up to ¥1.2 million a year on installment accounts, triple the previous limit. The maximum amount on other accounts would be doubled to ¥2.4 million, in changes that take effect in January 2024.
Use of both types of NISA account at once will be permitted, and existing time limits on tax exemptions will be abolished, according to the documents.
Kishida came to office just over a year ago pledging a new form of capitalism that would spread the benefits of growth more fairly. He’s also pledged to double people’s incomes from financial assets, in an aging country where many tend to opt for savings over riskier investments.
A shift in the roughly ¥2 quadrillion of household assets could buoy the stock market and help financial firms. Japanese households had about 54% of their financial assets in cash and deposits as of the end of March, and only about 10% in stocks, according to Bank of Japan data. That contrasts with the US, where about 40% of financial assets were in equities, and the euro area, where almost 20% was in stocks.
At the same time, people on incomes of more than ¥3 billion a year are likely to face an increased tax burden from 2025, according to the documents. Under the proposals, a person with an income of ¥5 billion is likely to face an additional tax burden of 2-3 percentage points.
Kishida had sought to tackle an anomaly whereby those on annual incomes of more than ¥100 million sometimes pay a lower rate of tax than people with lower incomes.
