Hey everyone, Hirokichi here. This time I ran a simulation on a simple question: if you invest 30,000 yen a month through Japan’s new NISA program for 20 years, how much could you end up with? I hope this is useful if you’re thinking about starting NISA or just want a rough benchmark for your monthly contribution.
■ A quick refresher on the NISA “Tsumitate” investment quota
Let’s start with the basics. Japan’s new NISA program has a “Tsumitate (installment) investment quota” with an annual cap of 1.2 million yen, which can be combined with the “Growth investment quota” (annual cap of 2.4 million yen). The lifetime tax-free holding limit is 18 million yen, so at a pace of 30,000 yen per month (360,000 yen per year), you’re nowhere near the cap and can comfortably keep contributing long-term. The tax-free holding period is also unlimited now, which is exactly why a long 20-year simulation like this one is worth running.
■ How much do you actually put in over 20 years?
30,000 yen x 12 months x 20 years comes out to a total principal of 7.2 million yen. That’s simply the sum of what you personally deposit — investment returns then build on top of that.
■ Simulating the results at different return rates
Now for the main event. I ran the numbers using three assumed annual return rates: 3%, 5%, and 7%. The 3% case is a conservative estimate based on the long-term track record of Japan’s public pension fund (GPIF, the Government Pension Investment Fund); 5% is close to the long-term average of a global equity index; and 7% is a somewhat bullish estimate closer to U.S. stock market averages.
Assumed return | Value after 20 years | Investment gain
3% per year | approx. 9.87 million yen | approx. 2.67 million yen
5% per year | approx. 12.38 million yen | approx. 5.18 million yen
7% per year | approx. 15.72 million yen | approx. 8.52 million yen
Principal only | 7.2 million yen | 0 yen
Here’s what that looks like as a chart.
Even with the same 30,000 yen a month, a 2-point difference in return rate adds up to more than 2 million yen after 20 years. That’s the power of compounding, and you can see the lines get noticeably steeper from around year 15 onward. Compounding rewards time more than anything else, so starting earlier tends to work in your favor.
■ Where compounding really kicks in
One thing I personally found interesting looking at the chart is how small the gap is in the first 5 to 10 years, regardless of return rate. Against a 7.2 million yen principal, the gap in gains at the 10-year mark is still only a few hundred thousand to about a million yen. But as you move into years 15 and 20, the compounding curve — gains generating more gains — really starts to show, and the gap widens sharply in the final five years. If it feels like your balance isn’t growing much in the early years, I’d say it’s worth resisting the urge to stop there.
■ A few things to keep in mind when reading simulations like this
(1) The assumed return rate is just that — an assumption
The 3%, 5%, and 7% figures here are estimates based on historical performance and index averages; they don’t guarantee future returns. In real-world investing, some years will be sharply positive and others will be negative.
(2) There’s always some risk of your balance dropping below principal
NISA’s tax-free treatment is a major advantage, but since it’s still investing, there’s a chance your balance could dip below what you put in over the short term. It’s best to think of it in terms of long-term, regular, diversified investing.
(3) The most important thing is starting with an amount you can sustain
30,000 yen a month isn’t a small sum, so my honest take is: start at a level that doesn’t strain your budget, and consider increasing it later once you have more breathing room financially.
Let’s keep at it, slow and steady. See you next time!
* This article is for informational purposes only and does not recommend any specific investment. The assumed return rates are estimates based on historical data and do not guarantee future investment performance. Please make investment decisions at your own responsibility.
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