Japan also faces a 'Stock Immigration' craze... "Increased yen depreciation pressure due to personal overseas outflow"

Increase in Overseas Investment as Number of NISA Accounts Grows
"Yen Selling Pressure May Intensify"

As overseas stocks gain popularity among individual investors in Japan, the downside risk to the yen's value is increasing, Bloomberg reported on the 22nd (local time).

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According to Bloomberg, after the Japanese government expanded the investment scope of the Nippon Individual Savings Account (NISA) tax-exempt system, individual net purchases of overseas stocks and funds reached 10.4 trillion yen (approximately 95.38 trillion won) last year. This is the largest scale since 2015, one year after NISA was introduced to encourage investment for individuals' retirement fund formation.

Daisaku Ueno, currency strategist at Mitsubishi UFJ Morgan Stanley Securities, said, "There is likely to be increased pressure to sell yen for overseas investments through NISA," adding, "As the number of NISA accounts increases in the future, the impact on the yen will become greater."

Currently, NISA is growing rapidly. As of September last year, the number of accounts reached 25 million, an increase of about 60% compared to the end of 2020.

The rapid growth in the number of NISA accounts appears to be influenced by the Japanese government's reform of the NISA system early last year. The government relaxed restrictions on the tax-exempt holding period and raised the annual contribution limit to encourage more citizens to invest.

Bloomberg noted, "Nomura Securities cited capital outflows to overseas securities as the reason for the dollar's rise against the yen last year," adding, "Investors can also invest in domestic assets through NISA accounts, but the yen's weakness has reduced even that investment appeal. In contrast, U.S. stocks have risen more than twice as much as Japanese stocks since the introduction of NISA."

If the scale of overseas investment through NISA continues to increase, the yen is expected to remain weak. Mira Chandan, a strategist at JP Morgan, analyzed, "More than half of Japanese household assets are still held in yen cash," and "We continue to judge that the structural cause of yen weakness is the outflow of individual investment funds overseas."

This content was produced with the assistance of AI translation services.