How Foreigners Can Start Investing in Japanese Stocks

With the Tokyo Stock Exchange (TSE) hitting record highs and Japanese companies attracting attention from Warren Buffett to retail investors, more and more foreigners are looking to gain exposure to Japanese equities. But how exactly can a non-Japanese citizen—whether residing in Japan or living abroad—start investing in Japanese stocks?

This guide breaks down everything you need to know: the available methods, required documents, taxation rules, recommended brokerages, and key tips to succeed in Japan’s unique investment landscape.

🌏 Why Invest in Japanese Stocks?

Japan’s economy is the third-largest in the world by nominal GDP and home to household names like Toyota, Sony, Nintendo, and SoftBank. But beyond the big players, Japan also has hundreds of smaller, innovative companies known as “hidden gems.”

Here are a few reasons foreign investors are flocking to Japan:

• 📈 Strong performance: The Nikkei 225 index surged to a 34-year high in early 2024.
• 🏦 Shareholder reforms: Japan is pushing companies to return more cash to shareholders through buybacks and dividends.
• 💴 Stable political and monetary policy: Despite deflation concerns, Japan has low political risk and a mature legal system.
• 🧠 Undervalued tech and automation sector: Global interest in robotics, semiconductors, and manufacturing is boosting interest in Japanese firms.

🧭 Who Can Invest in Japanese Stocks?

Anyone can. Japan does not restrict foreign ownership of stocks listed on the Tokyo, Nagoya, or Fukuoka stock exchanges.

However, the way you invest depends on where you live:

➤ Option A: You live outside Japan

You’ll likely use international brokerages or ETFs.

➤ Option B: You live in Japan

You can open an account with Japanese online or traditional brokerages.

🇯🇵 If You Live in Japan: How to Open a Japanese Brokerage Account

If you’re a resident (with a visa), you can open an account with a local securities firm.

🔹 Major Online Brokerages in Japan:

📄 Required Documents:

• Resident card (在留カード)
• My Number card or notification slip (個人番号)
• A Japanese bank account (with matching name)
• Japanese phone number and address

⚠️ Note: Applications are mostly in Japanese. Monex offers partial English support. You may need a friend or translator if you’re not fluent.

🌍 If You Live Outside Japan: Your Best Options

Foreigners living abroad cannot easily open an account directly on the TSE. But you still have 3 main paths to access Japanese stocks:

1. Buy Japanese ADRs (American Depositary Receipts)

These are Japanese companies traded on U.S. stock markets, denominated in USD.

Examples:

• Toyota (TM)
• Sony (SONY)
• Nintendo (NTDOY)

➡️ Easiest way to gain direct exposure with a U.S. broker like Fidelity or Schwab.

2. Invest in Japan-focused ETFs

Exchange-traded funds give you instant diversification and are available on U.S., European, and other international exchanges.

Popular Japan ETFs:

• iShares MSCI Japan ETF (EWJ)
• WisdomTree Japan Hedged Equity (DXJ)
• JPMorgan BetaBuilders Japan ETF (BBJP)

➡️ Great for passive investors who want a simple, diversified exposure to Japan.

3. Use International Brokers with Access to the Tokyo Stock Exchange

Some global brokers offer direct access to Japanese stocks:

• Interactive Brokers (IBKR): Offers trading on the TSE. Supports multi-currency accounts and JPY-denominated trades.
• Saxo Bank: Offers a range of Asian markets, including Japan.

➡️ Best for active traders or those wanting full access to mid- and small-cap Japanese equities.

💼 Taxation for Foreign Investors

If You’re a Non-Resident:

• Japanese capital gains are usually not taxed by Japan for foreign non-residents.
• Dividend withholding tax is typically 15–20%, depending on your country’s tax treaty with Japan.
• Consult your local tax advisor for foreign tax credits.

If You’re a Resident in Japan:

• Capital gains and dividends are taxed at 20.315% (15% national + 5% local surtax).
• You’ll file this as part of your annual income tax return unless using a special tax-handling account.

🧾 Many brokers offer “特定口座 (tokutei kōza)” to handle taxes automatically for you.

🧠 Pro Tips for Foreign Investors in Japan

• 💱 Beware of currency exchange risk. If your base currency is USD or EUR, watch for JPY volatility.
• 💡 Use NISA (Nippon Individual Savings Account) if you’re eligible. It’s a tax-free investment wrapper available to residents.
• 🔍 Check for shareholder perks (株主優待). Japanese companies often reward investors with goods or gift cards, a unique local incentive.
• 🌐 Use Yahoo! Finance Japan (in Japanese) or Nikkei for local market news.

📊 Popular Japanese Stocks to Watch

🧭 Final Thoughts

Japan’s stock market offers more than just exposure to a stable economy—it opens the door to unique industries, long-term value investing, and companies that shape global trends.

Whether you’re a resident investor opening an account with SBI Securities or an overseas investor buying Japanese ETFs, the tools are at your fingertips. With the right strategy, you can ride the wave of Japan’s resurgence—and enjoy sushi 🍣 with your dividends.