Blog 004, Ketan Katkar, Jun 2018, Personal financing and investments in Japan

Hello everyone, I am Ketan Katkar (DD Meta 2017). I came to Japan in October of 2017 and started working in Tanaka Kikinzoku Kogyo, as a Research engineer in the semiconductor industry. Currently I live in Tsukuba, Ibaraki prefecture. In my free time, I like to try new adventures (like skydiving, skiing, and surfing) and keeping my love for cycling, running and trekking growing.

In the following blog, I have shared my experience on Personal financing and various investment options in Japan. I hope it turns out to be useful in some way or another for the readers. I nominate Harshad Bokil from Koriyama to write the next blog.

Disclaimer – The following article describes my experiences and opinions. By no means, I am advertising or promoting any of the mentioned parties. The information written is collected from internet and I have tried to mention the sources, however this information may change by the time you read the article so the information should be checked before accepting the suggestion.

I came to Japan around 8 months before and since I received my first pay cheque, I got interested in my personal financing and investments options. At first because of very limited knowledge of Japanese, I had trouble of understanding how things worked. Nevertheless, with time and improving my Japanese skills I started exploring options. In the following article, I have tried to express my experience which a newly joined company employee experiences’ after joining a Japanese company.  I hope you find it useful in certain way.

The article in mainly divided into two parts

1)      Japan National Pension Scheme

2)      Investment Options

Japan National Pension System

Whether we are a student or an employee in Japan, according to the Social Insurance Agency, all residents of Japan between the ages of 20 and 59 are required by law to enroll in “kokumin nenkin,” or the national pension system, regardless of nationality.

1)      Kokumin nenkin (国民年金) [こくみんねんきん]

The contribution amount for the National Pension is 16,340/month.  Kokumin nenkin pension benefits starts only after paying into the system for 10 years (updated from August 2017, previously it was 25 years) and, in principle, when one reaches the age of 65.The annual kokumin nenkin benefit is calculated to be ¥779300/year if you paid into the system for 40 years.

2)      Kosei nenkin (厚生年金) [こうせいねんきん]

Kosei nenkin is an additional pension scheme, which the corporate workers have to participate. If you are a regular corporate worker, you and your spouse are also automatically enrolled by the employer for the additional, salary-proportional “kosei nenkin” pension system on top of the kokumin nenkin. The kosei nenkin premium payment should appear as a deduction on your monthly pay slip. The monthly premium an employee pays ranges from ¥7,348 to ¥46,488. Contributions are deducted from your salary and then paid by your employer into the system. Contributions are also taken from bonuses.

Now let us answer a question. What if you are not planning to stay as long as 25 years in Japan? Can you get the money paid back when you leave the country?

Yes, it is possible. It is called the “Lump-sum Withdrawal Payment” (dattai ichijikin/だったいいちじきん/ 脱退一時金). Who can apply?

1) Applicants should not be possession of Japanese citizenship.
2) Applicants have directly paid National Pension Insurance contributions as an insured person for a total of six months or more (there are some exceptions), or have paid Employees’ Pension Insurance contributions for six months or more.
3) Applicants should not have a place of residence in Japan.
4) Applicants have not applied for receipt of pension benefits before (including Disability Allowance).
5) Applications must be made within 2 years of departure from Japan, and can only be made from outside of Japan. (For which you have to cancel your alien registration, submit the notice of forfeiture of kokumin nenkin and obtain the claim form at your local municipal office)

How much will you get back?

For kokumin nenkin -

Time period when you leave Japan	Amount refunded
After 6 months and before 36 months	Between ¥49470 to ¥296820
After 36 months and before 10 years	Payments will be calculated based on 36 months at the maximum
10 years or later	May receive the Japanese old age pension

For more details - http://www.nenkin.go.jp/international/english/lumpsum/lumpsum.files/A.pdf

Kosei nenkin refunds are based on the period of contribution and your average salary. To receive a refund, payments must have been made for at least six months.

For more detail information, you can visit the following website - http://www.nenkin.go.jp/international/english/nationalpension/nationalpension.html

I also find this article very helpful for special cases (such as dependents, self-employed) https://blog.gaijinpot.com/guide-pensions-foreign-residents-japan/

Investment and financing options

1)      Remittance

NRE and NRO accounts

State Bank of India along with other banks like ICICI and HDFC offer NRI (Non-resident Indians) different options to send money back to India. You can always do a direct wire transfer into existing Indian bank accounts. Therefore, what is that, these banks are offering to you?

NRI has the option of opening a Non Resident Rupee (NRE) account and/or a Non Resident Ordinary Rupee (NRO) account. Both the accounts can be opened as savings account and are Indian Rupee accounts.

NRE account is used to when you want to park your overseas earning remitted to India converted to Indian Rupees. NRE account is Tax free (no Income tax, wealth tax and gift tax) in India. NRE account can be jointly held with another NRI but not with resident Indian.

NRO account is used to deposit income originated in India (such as salary, rent, dividends etc). Interest earned in NRO account and credit balances are subject to respective income tax bracket and are subject to applicable wealth and gift tax.  NRO account can be held with NRI as well as resident Indian (close relative).

What will you have to do to open the NRE and NRO account?

If you already have an account in the one of the Indian banks mentioned above (SBI, ICICI, HDFC) you can simply convert that saving accounts into NRE and NRO account. Both these accounts are made parallel and your previous balance will be transferred to the NRO account. You will have to deposit your earnings into NRE account from Japan. The account shifting process can be done both in India and in Japan (however, I will recommend you do it in India, as it is more hassle free than in Japan).

Requirements to open NRE account – Residence card copy, Passport and visa copy, my number copy, Salary slip from company.

For more details - https://www.onlinesbi.com/nri/sbi_home.html ; https://www.icicibank.com/nri-banking/bankAccounts/nre-saving-accounts.page

Some Popular Services used for remittance

1)      SBI Japan – If you want to remit, using cash this is the best options. SBI Japan has a branch in Nihonbashi, Tokyo, but if you do not want to go to the branch always you can open a current account at SBI, Tokyo and therafter register under fax remittance scheme (convey instructions by fax for the remittance). However, it is a much tedious procedure and has many criteria to be fulfilled. More details - https://www.sbijapan.com/en/remittance/

2)      Brastel Remit Services – It is an online transfer service, which is very convenient. All you have to do is create an account online (which takes around a weeks’ time to verify) and Furikomi (振込) （ふりこみ）i.e transfer the money into their account. Within 1 to 3 business days, the money will be transferred. However, the maximum remittance limit is INR 495000. Therefore, if you want to transfer more amount then you will have to do it in steps. More details - http://brastelremit.jp/eng/home

3)    Worldremit – Similar to Brastel however the exchange rates offered are the best in the available. In addition, the maximum limit on the remit is JPY 1,000,000. More details - https://www.worldremit.com/en/India

4)     Western Union – It is one of the oldest way of transferring money, and have tie-ups with almost all the banks in Japan and India. However, the exchange rates are extremely low and is not recommended. More details - https://www.westernunion.com/jp/en/send-money.html

5)     Japanese Banks – This option is very expensive and especially if you are transferring a large amount. 

As on 25 May, the mid-market rates was 1 JPY = 0.6194 INR (Source: ww.xe.com). Note that this rate is not available to consumer client

Exchange Rates comparison

Bank name	Exchange Rate	Exchange Fees
State bank of India	0.6137 (0.6177 if amount > 500000 JPY)	2000 JPY
Brastel Remit Services	0.6126	880 to 1680 JPY
Worldremit	0.6171	1 JPY
Western Union	Rate not published officially (less than 0.5944	990 to 6500 JPY
Japanese Banks [Seven banks]	0.5944	10007600 JPY

2)      Mutual funds

Investing in Mutual funds in Japan is not a very lucrative investment options. However compared to the saving account interest rates in Japanese bank (maximum is 0.02% in Nomura Savings account and minimum is 0.001% in Mizuho or MUFG Savings account), you can get around 1.5 – 2 % return from mutual funds (with moderate risk, for short term). For long term, investments you can expect around 10% return rates. Currently I have tried investing a small account in a low-risk Mutual fund offered by Mizuho banking services. It offers much smaller rates compared to any fund in India, so if you want to move out of Japan in few years it is better to invest in Indian market. More details - https://fund.www.mizuhobank.co.jp/webasp/mizuho-bk/fund/pc/search/fundlist.aspx?ct=1&ct=2

3)      Cryptocurrency

Japan is the global leader in the market development of cryptocurrencies. Currently yen accounts for 56.2 percent of bitcoin (BTC), the most popular cryptocurrency also Japan is the first and only country that has a proper legal system regulating cryptocurrency trading. Japan’s largest cryptocurrency exchange operator in Japan is bitFlyer.

After coming to Japan in October 2017, I opened my bitFlyer account in November. When you create a new account, your initial account class for bitFlyer services is “Wallet Class”. You cannot purchase and sell virtual currency through it, to do that you need to upgrade to Trade class. To upgrade you need to submit the following documents and the entire upgradation process takes around 1 week time.

1)      Proof of Identity (Residence card, passport details etc.)

2)      “My Number” – Social security and Tax number System

After submitting these online copies, you will get a non-forwardable registered mail at your residing address. To verify it you will have to click a picture of yourself with the residence card and that registered mail and upload it on their website. Once it is verified, you can start trading.

bitFlyer offers different services such as buy, sell and trade, lighting spot, FX and Futures of virtual currency. Bitcoin, Ether, Ether Classic, Litecoin, Bitcoin Cash, Monacoin and Lisk are the virtual currency available on bitFlyer to trade. The mobile application is very convenient and fast (especially virtual currency being highly volatile prices change in seconds). You can even deposit money into your wallet through nearby convenience store.

Disclaimer: Cryptocurrency is a debatable topic and the prices are highly volatile, my own views on it are not favorable. However, I believe that if you hold on to your cryptocurrency their value might increase. Apart from investment purpose, you can actually use it to buy stuffs. Japan is currently leading the actual use of cryptocurrency to buy services and products. For example, Bic Camera Inc., the operator of a chain of stores selling various electronics, in July began accepting BTC at every outlet in Japan, with support from bitFlyer.

4)      Commodities – Gold, Silver and Platinum

If you are planning to buy Precious metals, you can buy physical metal or you can purchase them in the paper format. However, what is the advantage of buying gold or platinum in Japan over India?

Tax – The consumption tax on gold is 8% in Japan and 15.67% (With the implementation of GST at 3 per cent for gold and 18 per cent for making charges, the effective rate comes to 15.67 per cent including 10 per cent customs duty) in India.

Price – Gold prices vary regionally (even in the same country) and with time. However, there is a significant difference between the prices. For example, as on May 24, 2018 24K Gold costs you 28537.71 INR/ 10 grams (before taxes) while the same costs 30500 INR/10 grams (before taxes, the most expensive being in Mumbai and cheapest in Kerala (28900)).

Note - In India, you do not pay customs duty on gold ornaments. However, duty applies to gold bars, biscuits, and coins. The duty-free allowance is up to Rs 50,000 for men and Rs 1 lakh for women. Indians who have lived abroad for six months or longer can carry up to 1kg of gold to India. However, customs duty will be applicable on this. Travelers currently pay 10% gold duty. This applies to the allowable limit of gold that a passenger can carry.

If you are planning to buy Precious metals in Japan, Tanaka Kikinzoku Kogyo and Mitsubishi Materials Corporation can be trusted for the purity.

Tanaka Kikinzoku Kogyo – 

Tanaka G&P planner – If you do not want to physically buy the metal you can establish an online account where you can trade “Gold “and “Platinum”. You can purchase the metal (at the retail price on the specific date of buying) and sell it easily from the internet (at the retail price on the specific date of selling) at any time. The transaction rates are very low, which makes it more convenient. Currently I have subscribed to the monthly plan where every 23^rd of the month, a fixed amount of Gold and Platinum is purchased for me, directly from my bank account. For more detail you can visit - http://gp.tanaka.jp

5)      Miscellaneous

Along with the investment options mentioned above, Real estate and Equity markets (Stock markets) are available options for investment. However, to participate in them you will need to be fluent in Japanese and have long term plans to stay in Japan. Exploring these markets will be my next adventureJ.