Last month, after my daughter's sixth birthday party at our Tokyo apartment, I sat down with my wife to talk about something that had been on my mind for weeks. The Japanese government had just confirmed the launch of a new children's tax-free investment account - Kodomo NISA - coming in January 2027. With ¥600,000 per year in tax-free growth potential for the next twelve years until she turns 18, this could mean hundreds of thousands of yen in savings for her education or future.

But here's where it got complicated. Every time I tried to research children's investing in Japan, I hit walls. Junior NISA was dead. The new Kodomo NISA wasn't launching until 2027. Current options were scattered across forum posts and half-translated government documents. After two hours of digging through RetireJapan threads and FSA announcements, I realized there was no comprehensive English guide covering everything a parent needs to know.

So I built one. This guide covers what the new 2027 Kodomo NISA is, how to prepare for it right now, what to do if you already have a Junior NISA account, current options for investing before the launch, and gift tax strategies every parent should understand. If you're trying to figure out how to invest for your children in Japan, this is your roadmap.

On December 19, 2025, the Japanese government released the 令和8年度税制改正大綱 (2026 Tax Reform Outline) with confirmed details about a new children's investment program launching in January 2027. This is not Junior NISA 2.0. This is a fundamentally different system designed to fix what went wrong the first time.

Here's what we know for certain about the new Kodomo NISA:

The program launches in January 2027. Children ages 0 through 17 will be eligible to open accounts. Parents or guardians will manage the accounts, but here's a crucial difference from the old system: children age 12 and older must give consent for any withdrawals. This consent requirement is designed to create teachable moments about money management and prevent parents from raiding accounts without their teenager's knowledge.

The annual contribution limit is ¥600,000 per child, lower than the old Junior NISA's ¥800,000 limit. The lifetime cap is ¥6 million total per child. This is where the math gets interesting for families.

Let's say you have a family of three: two adults and one child. Under the current NISA system, the two adults can each contribute up to ¥18 million over their lifetimes for a combined family capacity of ¥36 million in tax-advantaged investments. Add one child with a ¥6 million Kodomo NISA cap, and your family's total tax-advantaged investment capacity becomes ¥42 million. That's not a small number.

The stated purpose, according to the Japan Times coverage of the tax reform outline, is "flexible asset management to meet needs such as university enrollment." The age 12 consent requirement for withdrawals suggests the government wants this money available for education while also teaching children financial responsibility.

Here's how the new Kodomo NISA compares to other children's investment options in Japan:

The key takeaway: Kodomo NISA offers the best tax-advantaged growth for children's education savings once it launches, but you'll need other options until January 2027.

If you want to start investing for your child right now in February 2026, you can't wait for the new Kodomo NISA. That's eleven months away. So what do parents do in the meantime?

The answer is a minor taxable account, called 未成年口座 in Japanese. These are regular brokerage accounts opened in your child's name with you as the managing guardian. The major Japanese brokerages - SBI Securities, Rakuten Securities, and Monex - all offer them.

Let me walk you through exactly how to open one, because this is where the procedural details matter.

At Rakuten Securities, you must first have your own general trading account. You can't open a minor account in isolation. Once you have a parent account, you log in and navigate to the minor account application section. The documentation requirements are specific: you need a 住民票 (family register) showing all household members and including your child's My Number, issued within the past six months with official stamps.

Trading authority is automatically assigned based on your child's age. Under 15, only the parent can execute trades. At 15 and older, both parent and child can trade. Minor accounts at Rakuten have restrictions: no margin trading, no futures, no options, no FX, no CFD, and no Money Bridge service linking to Rakuten Bank. This is protective policy, and it makes sense.

Here's the community wisdom that isn't in the official documentation: RetireJapan forum members who've actually done this report it can take upwards of two months to get children's accounts fully operational. Not the "3 business days" SBI advertises. Two months. The family register documentation requirements trip people up. The My Number coordination takes time. City offices sometimes issue the wrong type of 住民票. Start this process early if you're serious about it.

The tax treatment for minor accounts is the same as adult taxable accounts: 20.315% on all capital gains and dividends. This breaks down to 15% national income tax, 5% local resident tax, and 0.315% reconstruction tax (which continues until 2037). I strongly recommend choosing 特定口座・源泉徴収あり (special account with withholding) when setting up the account. This option means the brokerage automatically withholds and remits taxes to the National Tax Agency, so your child doesn't need to file tax returns. One less administrative headache.

The obvious question: is a taxable account worth it when tax-free Kodomo NISA is coming in 2027?

The math depends on your timeline. If you start now in February 2026, you get eleven months of market exposure and compounding before Kodomo NISA launches. Historical S&P 500 data suggests you're more likely to gain than lose over an eleven-month period, even accounting for the 20.315% tax on gains. Plus, you're building the habit and system now rather than waiting. Once Kodomo NISA opens in 2027, you can open that account too and run both simultaneously - the taxable account for amounts exceeding the ¥600,000 annual Kodomo NISA limit, and the Kodomo NISA for tax-advantaged growth up to the cap.

Here's where the Japan system gets interesting in ways that US and UK parents can only dream about: the gift tax annual exemption.

In Japan, each person can receive up to ¥1.1 million per year in gifts without paying any gift tax. This isn't a family limit or a household limit. It's per recipient. And it resets every calendar year.

Now add grandparents to the equation. If both sets of grandparents want to contribute to their grandchildren's futures, each grandparent can gift each grandchild ¥1.1 million annually. A family with two children and four involved grandparents could theoretically transfer ¥6.6 million per year from the grandparent generation to the grandchild generation without triggering a single yen in gift tax. Over ten years, that's ¥66 million in tax-free wealth transfer.

The gift tax exemption applies to cash, stocks, real estate, insurance payouts, cars, jewelry, even golf club memberships. For investment purposes, cash gifts are cleanest. Parents or grandparents transfer money to the child's bank account, document it properly, then use that cash to fund the child's brokerage account.

What happens if you exceed the ¥1.1 million exemption? Japan's gift tax rates are progressive and steep. Small overages face relatively modest rates, but large gifts can hit tax rates up to 55%. This is why the annual exemption strategy works so well - stay under ¥1.1 million per recipient per year, and you avoid the tax entirely.

There are two special exceptions worth knowing about. First, there's a one-time ¥15 million tax-free gift specifically designated for educational expenses. This can cover tuition, textbooks, school supplies, even study abroad costs, but it must be used for education-related spending. I haven't seen clear guidance on whether purchasing investment trusts in a Kodomo NISA account counts as "educational expenses" under this rule, so I'd be cautious about relying on it for securities investments.

Second, there's an alternative system called "settlement at time of inheritance" (相続時精算課税) for transfers from people age 60+ to recipients age 18+. This allows a ¥25 million lifetime deduction for gifts between these generations, but any amount exceeding the annual exemption plus the special deduction gets taxed at 20%. This system is more relevant for large one-time asset transfers like real estate than for systematic children's investing.

The practical strategy I'm using: my in-laws gift Lily ¥1.1 million each year on her birthday. We document it with a simple signed gift letter, deposit it in her bank account, then transfer it to her minor account at SBI Securities where it goes into eMaxis Slim All Country index fund. We'll continue this until she's 18. That's ¥19.8 million transferred tax-free over her childhood, growing in a diversified global equity fund. When the 2027 Kodomo NISA launches, we'll redirect ¥600,000 of the annual gift into the tax-advantaged account and put the remaining ¥500,000 in the taxable minor account.

If you opened a Junior NISA account between 2016 and 2023, you might be wondering what happens now that the program has ended. I have surprisingly good news: the government changed the rules in 2024 in a way that actually made these accounts more useful than when the program was active.

First, some quick context on what Junior NISA was. It launched in April 2016 as Japan's answer to helping families invest for their children's futures, modeled after the adult NISA program. Parents could contribute up to ¥800,000 per year into stocks, investment trusts, ETFs, or REITs, with tax-free growth for five years. After the five-year period, investments automatically rolled into a 継続管理勘定 (continuation management account).

The problem was the brutal withdrawal lock. If you needed money before your child turned 18, the entire account would be taxed retroactively and immediately closed. Not just the withdrawal amount - the entire account. This made Junior NISA nearly useless for actual educational expenses that often happen before age 18. The system was so cumbersome that adoption rates stayed low throughout its eight-year run. In August 2025, when the FSA proposed the new Kodomo NISA, they explicitly cited Junior NISA's "low adoption due to cumbersome rules" as the reason for creating something better.

Junior NISA officially ended in December 2023. No new accounts could be opened after that date, and no new contributions were allowed into existing accounts starting January 2024.

But here's the plot twist that changed everything.

Starting in 2024, all Junior NISA accounts allow tax-free withdrawals at any time, for any reason, at any age. Read that again. The withdrawal lock that made the original system so restrictive? Gone. If your child is 3 years old and you need funds for international preschool, you can withdraw tax-free. If they're 12 and heading to boarding school, you can withdraw tax-free. The draconian "withdraw early and lose everything" rule no longer applies.

Here's how it works mechanically. After your investments complete their original five-year tax-free period, they automatically roll into a 継続管理勘定 (continuation management account). You can't add new money to this account since the Junior NISA program ended, but everything already invested continues growing tax-free until your child turns 18. There's no amount limit on this rollover, even if market gains push the value above the original ¥800,000 annual contribution cap.

When your child reaches age 18, they receive a password in the mail and a standard "New NISA" account is automatically created in their name. At that point, they have full control.

One important limitation: you cannot transfer Junior NISA balances into the new 2024+ adult NISA system. The continuation account is separate. By 2029, all existing Junior NISA accounts will have completed their minimum five-year investment period and rolled into continuation accounts.

What does this mean practically? If you have an existing Junior NISA account, leave it alone. Let it grow tax-free. The 2024 rule change transformed it from a locked box into a flexible educational fund that happens to grow tax-free. That's a significant improvement over the original design.

When I mentioned to my wife's family that we were investing for Lily through a brokerage account, her mother looked concerned. "What about gakushi hoken?" she asked. "We used it for your wife's university education. It's safe."

Gakushi hoken is a combined educational savings and life insurance product. According to usage surveys, about 49.8% of Japanese families with high school-age or younger children use it, and 45.1% of families with university students have used it. It's culturally established. It feels safe. Japanese insurance salespeople love recommending it.

The math, unfortunately, doesn't support the popularity.

Gakushi hoken typically delivers around 8% total return over 20 years. Not 8% annual. 8% total. Over two decades. That's roughly 0.4% annually. When I ran the numbers for a standard gakushi hoken plan versus investing the same amount in a low-cost index fund, the difference was stark.

Let's say you contribute ¥800,000 per year to gakushi hoken for 18 years. You'd put in ¥14.4 million total. After 20 years, you'd receive approximately ¥15.55 million back, for a gain of ¥1.15 million. That's your 8% total return.

Now take the same ¥800,000 annual contribution and invest it in a low-cost global index fund averaging 7% annual returns (which is conservative based on historical data). After 18 years, you'd have approximately ¥27.4 million. Even after paying 20.315% capital gains tax on the growth in a taxable account, you'd net over ¥24 million. That's ¥8.45 million more than the gakushi hoken approach.

If you used the ¥600,000 annual Kodomo NISA limit instead, that entire ¥6 million lifetime contribution would grow tax-free. At 7% annual returns over 18 years, ¥600,000 invested annually would become approximately ¥20.4 million, completely tax-free.

So why do nearly half of Japanese families use gakushi hoken despite the poor returns?

There are two legitimate reasons. First, it provides a death benefit. If the parent contributing to the policy dies, the insurance company pays out the full expected benefit amount regardless of how much has been contributed. For extremely risk-averse families or families with health concerns, that insurance component provides peace of mind that pure investment accounts don't offer.

Second, it functions as the "bonds" portion of a portfolio. If you're psychologically unable to stomach market volatility with your child's educational funds, gakushi hoken provides guaranteed returns, even if those returns barely keep pace with inflation. Some families use it as their conservative allocation and supplement it with taxable or NISA investing for growth.

The RetireJapan community consensus is blunt: "Gakushi hoken a bad idea." Multiple forum threads calculate the returns and recommend index fund investing instead. I agree with them. The insurance component is expensive for what you get, and the returns are dismal. Unless you have specific risk tolerance or health concerns that make the insurance aspect valuable, your child's educational funds will grow substantially more through index investing, even in a taxable account.

I've spent the last 2,900 words explaining the systems. Now let me tell you what I'm actually doing and what I'd recommend based on your situation.

If you have an existing Junior NISA account from before 2024, do nothing. Leave it invested. The 2024 rule change giving you flexible tax-free withdrawals transformed it into a genuinely useful account. There's no reason to close it or mess with it. Let it grow in the continuation management account until your child turns 18.

If you're starting fresh in February 2026 and want to invest for your child right now, open a minor taxable account at SBI Securities or Rakuten Securities. Yes, you'll pay 20.315% tax on gains. But you get eleven months of market exposure before Kodomo NISA launches, you build the systematic habit now, and you learn the brokerage interface while your stakes are still small. Choose 特定口座・源泉徴収あり for automatic tax handling. Invest in a low-cost index fund like eMaxis Slim All Country. Set up automatic monthly transfers from your bank account to your child's bank account to their brokerage account. 仕組み化 (systematization) - build it once, let it run automatically.

When January 2027 arrives and Kodomo NISA accounts become available, open one immediately. Redirect your first ¥600,000 of annual contributions into the tax-advantaged Kodomo NISA. If you're contributing more than ¥600,000 annually through gifts or family savings, continue using the minor taxable account for amounts above the Kodomo NISA cap. The two accounts work together: tax-free growth for the first ¥600,000, taxable growth for anything beyond that.

One final consideration: if you're a US citizen living in Japan, talk to a cross-border tax accountant before implementing any of this. FBAR reporting requirements for children's foreign financial accounts, PFIC treatment of Japanese investment trusts, and other US tax complications can make what seems simple for Japanese nationals significantly more complex for Americans abroad. I'm not qualified to advise on US tax issues, and you need specialized expertise there.

Can foreigners open NISA accounts for their children in Japan?

Yes, as long as you're a Japan tax resident with valid residency status. The same rules that apply to adult NISA apply to minor accounts and the upcoming Kodomo NISA. Your visa status (work visa, spouse visa, permanent residency) doesn't restrict NISA access. You just need to be paying taxes in Japan.

Does my child need a My Number card to open a minor account?

Your child needs a My Number (the 12-digit number itself), which appears on your family's 住民票. They don't necessarily need a physical My Number card. The brokerage documentation typically requires the family register showing your child's My Number clearly visible.

Can grandparents open minor accounts for their grandchildren?

At most brokerages, no, unless the grandparents are legal guardians. SBI Securities explicitly states in their FAQ that grandparents cannot open minor accounts for grandchildren. The account must be opened by the parent or legal guardian. However, grandparents can absolutely gift money to the grandchildren, which the parents then invest in the minor account under their management. This is actually the recommended approach for the ¥1.1 million annual gift tax exemption strategy.

What happens when my child turns 18?

For current minor taxable accounts, the account converts to a regular adult account when the child reaches age 18. They receive login credentials and full control of the account. For the new 2027 Kodomo I expect Kodomo NISA balances will either automatically roll into the child's adult NISA account or require a manual transfer process. The FSA should clarify this by spring 2026.

Can I transfer a minor taxable account balance to a NISA account at age 18?

No, you cannot transfer existing taxable account balances directly into a NISA account. You would need to sell the investments in the taxable account (triggering capital gains tax), withdraw the cash, and then contribute that cash to the NISA account (subject to the annual contribution limit). This is one reason to start children in a Kodomo NISA rather than a taxable account if the timing works out.

Do US citizens have FBAR reporting requirements for their children's Japanese accounts?

Yes, almost certainly. If you're a US citizen, you must report all foreign financial accounts (including accounts in your children's names) if the aggregate value exceeds $10,000 at any point during the year. Children's accounts count toward this threshold. Additionally, Japanese investment trusts are typically classified as PFICs (Passive Foreign Investment Companies) for US tax purposes, which creates extremely punitive tax treatment. If you're American, consult a cross-border tax specialist before opening any investment accounts in Japan, including for your children.

What are the best funds for a child's Kodomo NISA or minor account?

I can't give investment advice, but I can tell you what the RetireJapan community recommends and what I'm using personally. The consensus is low-cost, globally diversified index funds. Specifically, eMaxis Slim All Country (世界株式(オール・カントリー)) is extremely popular because it covers developed and emerging markets globally, has rock-bottom fees (0.05775% as of 2024), and is available at all major brokerages. Some people prefer 95% index funds and 5% Japanese dividend stocks for home bias. Others go 100% eMaxis Slim All Country for maximum simplicity. The key is low fees and broad diversification for a child's 15-20 year investment horizon.

Can I have both a regular adult NISA and a Kodomo NISA in the same family?

Yes, absolutely. Each family member gets their own NISA allocation. Two adults with regular NISA accounts can each contribute up to ¥1.2 million annually (¥18 million lifetime each), and their child can separately contribute up to ¥600,000 annually (¥6 million lifetime) to a Kodomo NISA. These limits stack. They don't reduce each other.

When my wife and I finally finished that post-birthday conversation about our daughter's financial future, we'd covered two pages of notes. Junior NISA history, continuation accounts, the 2027 Kodomo NISA details, minor account procedures, gift tax optimization, gakushi hoken comparison. It felt overwhelming.

Then I remembered something I'd learned building our own Fundamental, Fun & Future budgeting system: complexity becomes simple when you break it into sequential steps and systematize it.

So here's what we decided. February 2026, open a minor account for our daughter at SBI Securities where I already have an account. Request the family register this week while the decision is fresh. Set up the ¥600,000 annual transfer from her grandparents as a birthday gift. Invest it automatically in eMaxis Slim All Country. January 2027, open her Kodomo NISA account the day applications become available. Redirect the annual gift into the tax-advantaged account. Let both accounts run on automatic transfers. Check quarterly, rebalance if needed, otherwise leave it alone.

Eighteen years from now, when Lily's evaluating university options or considering study abroad or starting her first job, that ¥6 million Kodomo NISA plus the taxable account will have grown into something meaningful. Not because we made brilliant investment picks or timed the market perfectly, but because we started systematically and let compounding do the work.

The English-language resources on this topic will get better as more parents navigate these systems. But you don't need to wait for perfect information. The framework is clear enough now to start. Open the account. Set up the automation. Fund it with tax-free gifts when possible. Choose low-cost index funds. Let it grow.

Your future child—and your future self—will thank you for thinking beyond the immediate complexity and building systematically for the long term.

【免責事項 / Disclaimer】
本コンテンツは教育・情報提供のみを目的としており、投資助言ではありません。投資判断はご自身の責任で行ってください。過去の実績は将来を保証しません。
This content is for educational purposes only and does not constitute investment advice. Investment decisions are made at your own risk. Past performance does not guarantee future results.

Stay Wealthy

Jason

Building wealth for English-speaking permanent residents in Japan, one story at a time.