The Yomiuri Shimbun August 28, 2013
Use NISA system as pump-priming step water to reinvigorate investment
NISA 投資活性化の呼び水にしたい(8月27日付・読売社説)

We hope the Nippon Individual Savings Account system, or NISA, will help move individual financial assets held in the form of cash and deposits into investment and revitalize the nation’s economy.

NISA, a new tax system that offers tax exemptions on capital gains and dividend income from stocks and other investments of up to ¥1 million a year, will be introduced in January next year.

Financial institutions, including securities companies and banks, have already put their efforts to win new customers into full gear.

We applaud that stock markets will be reinvigorated due to competition over services among financial institutions, but they should refrain from forceful solicitation.

It is essential to carefully foster NISA by listening to investors so that the new system will become a pump-priming measure to help individual investment take root in this country.

People aged 20 or older and living in Japan can open a NISA account at a financial institutions. The tax exemption period is five years and if ¥1 million is invested every year, the capital gains and dividends on ¥5 million worth of investments will be tax exempt.

The total amount of individual financial assets in Japan is estimated at a massive ¥1.6 quadrillion. However, more than half of those are in cash and deposits. The ratio of stocks and other investments used to fund corporate activity is only about 8 percent, which is far lower than the 34 percent in the United States and 15 percent in Europe.

If individual assets, encouraged by NISA, flow into stock markets, it would be beneficial to corporate growth. The spread of long-term investment by individuals for the purpose of asset building will help stabilize stock prices.

Under Britain’s Individual Savings Account system, which NISA is modeled after, 40 percent of the population opened an ISA account.

Careful explanation essential

To promote wide use of NISA in Japan, it is indispensable for financial institutions to give detailed explanations about the new system to their customers.

Rather than placing priority on sales quota or simply stressing NISA’s merits, they must explain risks associated with investments as well as the system’s flaws.

For example, if losses are incurred due to a drop in the value of stocks and investment trusts, investors are not eligible for tax exemptions. Another problem is that if investors open a NISA account at a financial institution that only handles investment trusts, they cannot invest in particular stocks.

We urge people considering a NISA account to think carefully about selecting the financial institution where they will open their NISA account.

One person can only open one NISA account in principle and in the first four years, the individual must keep investing at the same financial institution. This is inconvenient for investors and is believed to be one reason financial institutions are desperately trying to attract and keep customers.

It is said that the Financial Services Agency plans to change this regulation so people can switch their NISA accounts to a different financial institution every year. The government should discuss changes to NISA to encourage its use by more people.

(From The Yomiuri Shimbun, Aug. 27, 2013)
(2013年8月27日02時03分  読売新聞)