Starting from scratch with “Questions and Answers”: A manual for utilizing the new “Mashate NISA” (New Installment System).

From savings to investment. Prime Minister Fumio Kishida’s “Asset-Income Doubling Plan,” which calls for the active participation of Japanese citizens in investment, will change the system that forms the core of the plan. The NISA (small amount investment tax exemption) system, which exempts tax on investment gains, will be greatly expanded starting in 2012.

Profits from the sale of stocks and investment trusts and investment gains are subject to a tax of approximately 20%. Under the current NISA, the maximum amount of tax exemption is 400,000 yen per year for the “nemate” NISA and 1.2 million yen per year for the general NISA (ordinary stock transactions).

However, after 20 years under the existing NISA, or after 5 years under the General NISA, investors had to choose whether to sell their stocks and investment trusts or transfer them to a taxable account. The General NISA and the “Temporary NISA” cannot be used together, and the lifetime tax-free investment limit for the “Temporary NISA” is 8 million yen. This is a meager resource to solve the “20 million yen retirement fund problem” that has long been a cause for concern.

The new NISA, on the other hand, allows for two levels of investment: a “savings account investment limit” for long-term investment and a “growth investment limit” for selecting and buying individual stocks. The maximum amount of lifetime tax-free investments will total 18 million yen, and the tax-free holding period will be indefinite. The increase in the maximum annual investment limit for the “reserve investment limit” to three times the current amount will have a particularly large impact.

The average household holding financial assets is 16.98 million yen and the median is 7.5 million yen, so most people are within the 18 million yen limit. This is, in effect, the government’s grand bargain of almost no tax on investments made by ordinary households,” said Yasuhiko Fukano, a financial planner.

There are “standard” accounts and investment trusts.

With a savings account, you can invest as little as 100 yen per month. The advantage of a savings account is the “compounding” effect, in which investment gains are reinvested to generate additional investment income. What happens if the lifetime tax-free investment limit of 18 million yen is used up by investing only in a single investment limit? Economic journalist Taiki Yorifuji estimates.

Let us assume that the investment rate is 5% per annum. If you invest 50,000 yen every month, after 30 years when the quota is used up, it will amount to 41.61 million yen, and after 50 years from the start of investment, it will amount to 110.41 million yen. This means that your assets could increase by more than 90 million yen from the principal amount.

The risk of investing in a savings account is relatively low, as you can invest at your own pace. The first step is to open a securities account and create a NISA account. Mr. Yorifuji explains which securities company to choose.