NISA — two quotas, one lifetime cap
Japan's reformed NISA is one of the most generous retail tax wrappers anywhere: gains and dividends inside it are tax-free with no time limit, against 20.315% in an ordinary account. But two things are routinely misunderstood — the difference between the tsumitate and growth quotas, and how the ¥18M lifetime cap actually counts. This page is built around those two, then the traps.
"The miracle of compounding returns is overwhelmed by the tyranny of compounding costs."
Tsumitate quota vs. growth quota
The biggest misconception is that you pick one. Under the old system (general NISA vs. tsumitate NISA) you did — but the 2024 reform lets you use both in the same year. What actually differs is how much goes in annually, and what you may buy.
| Tsumitate quota (つみたて投資枠) | Growth quota (成長投資枠) | |
|---|---|---|
| Annual limit | ¥1.2M | ¥2.4M |
| What you can buy | Only funds on the FSA's approved list — screened for long-term, diversified, low-cost investing. In practice: broad all-country and S&P 500 index funds, mostly non-distributing. | Listed stocks, ETFs, REITs and most funds. Excluded: securities under supervision/liquidation, funds with trust periods under 20 years, monthly-distributing funds, and high-leverage funds. |
| How you buy | Scheduled contributions only (regular, continuous purchases) | Lump sums or scheduled contributions — both work |
| Share of the lifetime cap | Up to ¥18M (can fill the whole cap alone) |
Up to ¥12M (cannot fill the cap alone) |
| Who it suits | Anyone contributing monthly. Most long-horizon investors never need anything else. | Investors who want individual stocks or ETFs, or who invest bonuses in lump sums. |
The ¥18M cap counts book value, not market value
Understanding this one rule explains the whole design. The lifetime cap is measured at acquisition cost, not current value:
- Gains never consume the cap. Once you have contributed ¥18M, the holdings can grow to ¥50M and you keep every yen of it inside the wrapper, tax-free, indefinitely. Nothing forces you out. This is what "unlimited holding period" really buys you.
- Selling restores the cap the following year — at book value. Sell a position you bought for ¥5M that is now worth ¥8M, and what comes back next year is ¥5M of capacity, not ¥8M.
- Restored capacity doesn't raise the annual limit. You still repurchase within that year's ¥3.6M (¥1.2M + ¥2.4M).
How the ¥18M splits
The growth quota is capped at ¥12M of the ¥18M, so at least ¥6M must come through the tsumitate quota.
The reverse is not true: the tsumitate quota can fill all ¥18M by itself. Never touching the growth quota is perfectly valid — and for a pure index investor it is arguably the default.
What the exemption is worth
¥18M compounding at 7% for 25 years reaches roughly ¥97.7M, of which about ¥79.7M is gain.
In a taxable account, realising that gain costs 20.315% — about ¥16.2M. Inside NISA it is zero. That single fact outweighs most stock-picking skill.
7% is a historical-average assumption, not a promise.
How fast should you fill ¥18M?
The contributions are identical in every row below — ¥18M — but the pace changes how many years that money compounds tax-free. All three are valued at year 35, assuming 5% a year:
| Pace | Years to fill | Total contributed | Value when filled | Value at year 35 |
|---|---|---|---|---|
| ¥300,000/mo (annual max) | 5 | ¥18M | ≈ ¥20.3M | ≈ ¥87.9M |
| ¥100,000/mo | 15 | ¥18M | ≈ ¥26.5M | ≈ ¥70.3M |
| ¥50,000/mo | 30 | ¥18M | ≈ ¥40.8M | ≈ ¥52.0M |
5% assumed, before tax and fees. Illustrative, not a forecast — model your own numbers in the calculator.
Same ¥18M in, a gap of more than ¥35M at year 35 — purely from how many years the money spent inside the wrapper.
Seven things people get wrong about NISA
"You have to choose between the tsumitate and growth quotas."
True under the old system, false since 2024. Both run together, for a combined ¥3.6M a year.
"You can't make scheduled contributions in the growth quota."
You can. The name misleads: monthly automatic purchases of index funds work inside the growth quota, and every major online broker supports it. This is the standard route for anyone investing more than ¥100,000 a month.
"The ¥18M cap is market value, so gains push me out of it."
It is book value. Contribute ¥18M, watch it triple, and your usage still reads ¥18M — all of it staying tax-free with no deadline.
"If I sell, the capacity comes back immediately."
It returns the following year, at book value, and repurchases still fit inside that year's ¥3.6M annual limit. The design deliberately does not support frequent trading.
"Losses inside NISA can offset gains elsewhere."
They cannot. This is NISA's biggest weakness. Losses in a NISA account are treated as if they never happened: no offsetting against taxable-account gains, no carry-forward. Gains go untaxed, and losses go unrelieved — the two sides of the same rule.
"US dividends are completely tax-free inside NISA."
Japanese tax (20.315%) disappears, but the 10% withheld in the US remains — and because NISA income isn't taxed in Japan, the foreign tax credit that would rescue it in a taxable account is unavailable. A small, certain cost on dividend-heavy US holdings.
"Reinvesting a fund's distributions doesn't use up capacity."
It does. A distribution reinvested inside NISA counts as a new purchase and consumes that much capacity. This is exactly why non-distributing (internally reinvesting) index funds fit NISA best.
Six administrative details worth money
1. Set dividends to "proportional allocation"
For Japan-listed stocks, ETFs and REITs held in NISA, dividends are only tax-free if your receipt method is 株式数比例配分方式 (paid into the brokerage account). Leave it on bank transfer or post-office receipt and your dividends get taxed 20.315% despite sitting in NISA. This is the single most common way people quietly lose the benefit — check the setting once.
2. Credit-card contributions cap at ¥100,000/mo
Most online brokers award points on fund purchases charged to a credit card, up to ¥100,000 a month (raised from ¥50,000 in March 2024). That lines up exactly with the tsumitate quota's monthly maximum. Point rates change often — check current terms.
3. Changing brokers is an annual decision
You may hold one NISA account at a time. Switching brokers is possible yearly, but once you have bought anything in a given year, the switch takes effect from the next year. Paperwork takes weeks, so start early. Holdings at the old broker stay tax-free where they are — they are not transferred.
4. Old NISA sits in a separate bucket
Anything bought under the pre-2024 general or tsumitate NISA is outside the new ¥18M cap and keeps running to the end of its own exemption period (5 years for general, 20 for tsumitate). It cannot be rolled into the new system, and there is no reason to sell early — just let it run out.
5. Favour non-distributing, low-cost funds
Distributions consume capacity when reinvested (misconception 7). For decades-long index investing, a low-cost all-country or S&P 500 fund that reinvests internally fits NISA's design best. The fund-selection reasoning lives in Strategy.
6. Consider iDeCo alongside it
NISA contributions are not deductible; iDeCo contributions are fully deductible from income. For stable earners, running both adds an annual income- and residence-tax saving on top of tax-free growth — at the cost of a lock-up until 60. See Accounts & Tax.
What NISA is bad at
This site does not market government programs. NISA is exceptionally favourable for long-term investors, but three weaknesses deserve to be understood in advance:
- No loss offsetting or carry-forward. A loss inside NISA is simply lost, taxwise. Concentrated bets and short-term trading inside NISA forfeit both the upside benefit and the usual tax relief. The rational conclusion: NISA is the box for holdings you expect to win over decades, not for speculation.
- The 10% US withholding is unavoidable. The wrapper is an imperfect fit for dividend-focused US strategies. Check this before putting a high-yield US ETF inside it.
- Capacity recycles only once a year. Sell-then-refill-next-year makes NISA poor for tactical trading. Turned around, though, the design itself rewards holding — which, for the readers of this site, is a feature rather than a flaw.
- The ¥1.2M / ¥2.4M annual quotas, the ¥18M lifetime cap, the ¥12M growth-quota sub-cap and the book-value reinstatement rule — Financial Services Agency, NISA site.
- The 20.315% rate on gains and dividends outside NISA, and the fact that NISA losses cannot be offset against taxable gains — National Tax Agency.
- Which funds qualify for the tsumitate quota — the FSA's published list of eligible funds.
NISA checklist
- Use both quotas — they are not alternatives. ¥3.6M a year combined.
- Fill the tsumitate quota first — up to ¥100,000 a month. For most people that is the whole plan.
- Beyond that, buy the same fund in the growth quota — ignore what the name implies.
- Set dividend receipt to proportional allocation — mandatory check if you hold Japan-listed stocks or ETFs.
- Prefer non-distributing, low-cost index funds — reinvested distributions eat capacity.
- Don't trade inside it — no loss offsetting, and capacity only returns next year.
- Spend it last — unlimited tax-free holding rewards patience.
The full picture
How NISA, iDeCo and the taxable account fit together, and what to fill first.
Accounts & Tax →Your first month
Week-by-week: opening the account and automating the monthly purchase.
Getting Started →Run your numbers
Turn a monthly amount and a horizon into a projected tax-free balance.
Calculator →