FW-84 -- Investing in Japan for Beginners

* * * * * * * * F R U G A L W A T C H * * * * * * * *
A weekly roundup of how to be frugal in the world's most
expensive country to live (unless you read this!), written
and compiled by Wendy J. Imura.

Regular edition, January 11, 2006 Issue No. 84

- Investing in Japan for Beginners
- Credits

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*** Investing in Japan for Beginners ***

Dear Frugal Readers,

Hope everyone enjoyed a good New Year's holiday- Frugal Watch
(and other Japan Inc ezines) were on a weeklong hiatus over
the break. Thank you for your patience, and welcome to 2006! I
look forward to another year of finding ways to make your life (and
mine) more frugal!

As such, you might be surprised at the title of this week's
issue - "Investing in Japan for Beginners." How, exactly, is
investing frugal? Shouldn't we be sitting around scanning newspaper
inserts for supermarket sales or reusing rubber-bands instead of
checking the stock charts? Well, while I am an advocate of saving
money, simply watching your cash pile up into mountains (or small
hills, even) gets pointless after awhile, especially in a country
with interest rates near zero. Accordingly, many foreigners turn
to investments to achieve a higher return on their money.

For individuals, there are a few options for
investing in Japan, some more complicated than others. For
people wanting English-based services, there are a number of expat-
oriented investment firms offering investment advising, tax
planning, and other services. Although the investment products are
centered mostly on offshore opportunities (making investment for
Americans and other nations with restricted tax codes difficult),
pension plans, mortgages, tax advice, and even health insurance are
also available. I have personally had an excellent experience
working with Stephanie Reichart of Banner Overseas Financial Services,
which has been in business since 1979. She will run a detailed
analysis of your future money needs and also offer a number of
potential investment options. Visit www.bannerjapan.com for more
information. Note that most purchases of the products offered by
these firms require an international bank transfer in a foreign

For those seeking something a little closer to home and who are
comfortable in a Japanese-language environment, Japanese brokerages
also are a reasonable option. They have a few points in their
favor that the ex-pat firms do not. For one, you can fund your
investment product purchases in yen through domestic bank transfers.
Second, many Japanese brokerages have convenient local offices in
most major cities. If you don't feel comfortable navigating a Japanese
website to open an account, you can trek on down to a local office and
get started. Finally, while you can be almost 100% sure that
the information on the investments will be in Japanese, brokerages are
offering an increasingly large variety of funds and products to
choose from, including investment in overseas stock markets, bonds,
real-estate investment trusts (REITs), and other mutual funds. Heck,
even the Japanese stock market is looking attractive these days.

Opening a brokerage account in Japan is actually quite simple. You'll
need your official inkan, your Alien Registration Card
information (the card itself, or a document issued by your local
city or ward office), and bank account information. I recommend taking
the time to visit the brokerage window (madoguchi) in person - it's
much like a bank-teller window. The staff will explain the various
forms necessary and the procedures through which you can withdraw
or deposit money. Some larger branches even offer Saturday seminars
on investing or how to use their online trading programs. In short,
if you have enough Japanese conversational skills to open a bank
account, you can also open a brokerage account - just politely ask
them to explain things to you on the forms, even if it takes some
time. Also note that a new Japanese taxation system (tokutei koza,
or special tax accounts for stocks) on investments levies a flat
10% tax up front, but eliminates the need to report your earnings
later on at kakutei shinkoku (or tax filing) in February/March.

There are many companies one can choose from - among the large
brokerages (Nomura, Daiwa, and Nikko), Nikko Cordial is rumored to
be the most customer friendly. Smaller brokerages with a more
"down-home" environment might also give you better service.
It really does depend, however, on the luck of the draw. If you'd
rather not be bothered by salespersons or advisors, then let them
know ahead of time. They'll make a note in your file. Of course,
the more money you invest, the friendlier the staff will be!
(Their commission is proportional to your investment.)

Finally, what to invest in? On this, I cannot offer much advice.
In the end, investment is your own responsibility - try and gather
as much information as you can, and realize that (unlike bank savings)
there is a possibility that you could lose money. Good luck!

Frugally yours,
Wendy J. Imura

PS: For those looking for professional financial planning services
in Japan, note that Banner Japan also offers these services in
English. Japan also has a system for licensing financial planners,
but the focus of their education seems to be more on budgeting and
insurance product selection. As such, their assistance might be
of limited help to the average ex-pat.

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Written by: Wendy J. Imura (frugalwatch@japaninc.com)
Edited by: JI

Copyright 2005 Japan Inc. Communications Inc.