Japan, explained.
Pulling Hirosaki Castle using ropes to its original position following repair works in Hirosaki, Aomori Prefecture, Japan on 26 August 2026 (Philip Fong/AFP via Getty Images)
Japan is trying to turn a nation of savers into investors, starting with its children.
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Child NISA: Japan’s attempt to redirect Asia’s generational wealthChild NISA: Japan’s attempt to redirect Asia’s generational wealth
Starting 1 October, Japanese families can begin applying to open Child NISA (Opens in new window) accounts, with investments beginning in January 2027. This new tax-advantaged investment account for children under 18 will allow families to build long-term financial assets for children while encouraging a new generation to participate in capital markets.
Japanese households hold roughly ¥2,386 trillion (Opens in new window) in financial assets with almost half still held in cash and deposits. Like many other Asian nations, this has left a deeper intergenerational imbalance. Elderly Japanese households aged 65 and older held an average of ¥24.9 million (Opens in new window) in savings in 2025, while younger households face rising costs for housing, education and raising children.
In July 2026, the share of household consumption spending devoted to food reached 30.1% (Opens in new window), the highest July reading since comparable data began in 2000. Rising living costs make it harder for younger households to accumulate wealth even as the need to build financial assets becomes more important.
NISA sits at the centre of the government’s attempt to change the equation. Modelled on the UK’s Individual Savings Account (Opens in new window), NISA allows individuals to invest in equities and mutual funds without paying tax on capital gains. Its broader purpose is to move households from saving to investing (Opens in new window).
The challenge is convincing households that some of their savings can become productive capital without sacrificing the security that made saving so attractive in the first place.
Whether it succeeds will depend less on the generosity of the tax break than on whether investing starts to feel as natural and trustworthy as saving.
For older Japanese, saving is a form of security. Investing carries risks that can feel difficult to justify when medical and living costs are uncertain.
This creates a difficult policy problem. Governments want older households to invest and spend more, but many are rationally reluctant to give up liquid savings. They need to protect themselves against longevity risk. Simply telling them to spend their wealth is unlikely to work.
A more promising approach is to make it easier for wealth to move gradually between generations. That is where Child NISA becomes interesting. Families can build long-term investments for children rather than simply holding cash until wealth eventually changes hands through inheritance.
Japan’s experience is not occurring in isolation. Other ageing Asian economies (Opens in new window) are experimenting with similar ways to build assets for younger generations. South Korea (Opens in new window) has expanded tax incentives for its Individual Savings Account, while Taiwan’s Legislative Yuan (Opens in new window) passed a bill to create universal, government-funded accounts for children under 18. Although currently stalled by the Executive Yuan (Opens in new window), Taiwan’s proposed system will provide annual government contributions and allow families to add their own savings, with part of the money invested for children until adulthood.
The approaches differ, but the underlying problem is similar: low birth rates, rapid ageing and large pools of wealth held by older generations. The policy question is increasingly how to build assets for younger households before wealth eventually passes through inheritance.
The Japan Securities Dealers Association (Opens in new window) reported 290,000 new NISA accounts in July, bringing the 2026 total to 2.22 million and total accounts to 20.14 million across 10 major securities firms. NISA purchases reached ¥11.76 trillion through July, with 38% going into Japanese stocks.
Understanding the origins of Japan’s saving culture helps explain why saving still outweighs investing.
After the Second World War, postal savings became the foundation of household finance (Opens in new window). The system became highly popular (Opens in new window) in late Showa Japan (1970–89) because of government backing and the easy access post offices provided nationwide. Deposits reached ¥260 trillion (Opens in new window) around 2000, making it the world’s largest postal savings system before privatization.
Younger Japanese see it differently. More than 44% (Opens in new window) of people under 50 have NISA accounts, compared with about 22% (Opens in new window) overall. For many, NISA is their first meaningful step into investing, much as postal savings introduced earlier generations to formal household finance.
It points toward a different way of thinking about demographic policy. Rather than treating ageing, low fertility and household wealth as separate problems, policymakers could address them together.
Japan’s Child NISA is therefore less a standalone solution than part of a broader Asian experiment. A Child NISA-style system would not solve demographic decline. But it could provide another mechanism for transferring wealth earlier, encouraging investment and giving children a financial stake before inheritance becomes the primary channel of wealth transfer.
Asia’s demographic challenge is also a capital-allocation challenge. The region is saving. What it needs are mechanisms to move existing wealth toward productive investment and younger generations.
Japan is attempting that transition from the bottom up. NISA is changing how individuals invest. Child NISA could begin changing when and how wealth reaches the next generation.
Whether it succeeds will depend less on the generosity of the tax break than on whether investing starts to feel as natural and trustworthy as saving.
About the author
Andrew Orchard
Andrew Orchard is a US Navy officer and former Michael Mansfield Fellow who served in multiple fellowship assignments within the Government of Japan, the Japan Forum for Strategic Studies, and the National Institute for Defense Studies.
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