[Explainer] “Kodomo NISA” Launches January 2027: A 6,000,000 Yen Tax-Free Limit and How It Differs from New NISA

Hey everyone, Hirokichi here.

I’ve got two kids still in elementary school, and we still hold a Junior NISA account from before that program ended. So it caught my attention that a new tax-free investment program for kids called “Kodomo NISA” is officially set to launch in January 2027. More options for building up education funds is good news for parents, so let’s walk through what Kodomo NISA actually is, including how it compares to the adult “New NISA.”

What is Kodomo NISA? A January 2027 launch is now official

With the passage of Japan’s 2026 tax reform bill, “Kodomo NISA” (also called “Kodomo Shien NISA,” or child-support NISA) is now officially set to launch on January 1, 2027. It’s open to minors from age 0 to 17, with an annual investment limit of 600,000 yen (about 50,000 yen a month) and a lifetime tax-free holding cap of 6,000,000 yen. There’s no time limit on the tax-free holding period — that’s one of the biggest features of this program.

The stated aim is part of the government’s “Doubling Asset-Based Income Plan”: getting not just adults but kids used to steady, long-term investing early on, while also helping ease the burden of education costs and supporting the country’s response to its declining birthrate (sources: Daiwa Institute of Research, Nikkei, and other reporting). There’s been a gap since Junior NISA stopped accepting new investments in 2023, and this program is essentially a redesigned revival of tax-free investing for minors.

You may see it called either “Kodomo NISA” or “Kodomo Shien NISA” depending on the financial institution — they refer to the same program, so don’t worry if the naming looks slightly different from one brokerage’s site to another. Online brokerages like SBI Securities and Rakuten Securities are reportedly already preparing their fund lineups and account-opening flows ahead of the January 2027 launch.

How does it compare to New NISA? Age, tax-free limits, and eligible investments

The adult-facing New NISA is open to anyone 18 or older, combining a “tsumitate” (installment) investment quota (1,200,000 yen a year) and a “growth” investment quota (2,400,000 yen a year) for up to 3,600,000 yen a year, with a lifetime tax-free holding cap of 18,000,000 yen. Kodomo NISA, by contrast, only has an equivalent to the tsumitate quota — there’s no growth-quota-style option for buying individual stocks. Eligible investments are also limited to “a set of mutual funds suited to long-term installment and diversified investing,” the same carefully screened lineup used in the adult tsumitate quota, bought on a fixed schedule and fixed amount (I report on our own New NISA results every month, by the way).

Once a child turns 18, that 6,000,000 yen tax-free allowance carries straight over into the adult New NISA’s tsumitate quota. There’s no gap in tax-free investing across the 18th birthday, which I think is a genuinely nice touch.

One more detail worth knowing: the tax-free holding cap is tracked by acquisition cost (book value), not market value — same as adult New NISA. In other words, even if the account’s market value rises above 6,000,000 yen, as long as the cumulative amount actually contributed stays within that cap, the allowance isn’t considered “used up,” and any unrealized gains keep their tax-free treatment.

Kodomo NISA vs. the old Junior NISA — a bigger cap and no time limit

Compared with our own Junior NISA balance, Kodomo NISA is a noticeably more usable program. The annual investment limit actually drops, from 800,000 yen to 600,000 yen, but the tax-free holding cap rises from 4,000,000 yen to 6,000,000 yen. The biggest difference is the tax-free holding period: Junior NISA topped out at five years, while Kodomo NISA has no time limit at all. Here’s a chart summarizing the comparison.

What this chart shows is that Kodomo NISA trades a slightly slower annual contribution pace for a much bigger total tax-free allowance and an unlimited holding period. With Junior NISA, you had to keep track of rollover procedures every time the tax-free period expired — Kodomo NISA removes that headache entirely.

A quick simulation: how much could a Kodomo NISA account be worth by age 18?

To make this a bit more concrete, here’s a simple estimate. If you contributed 600,000 yen a year starting at age 0, you’d hit the 6,000,000 yen lifetime cap around year 10 (roughly age 10). Let’s assume no further new contributions after that point, with the balance simply held and invested until age 18.

Assuming a 3% annual return, the estimated value at age 18 comes out to roughly 8,710,000 yen. At a 5% annual return, that figure grows to roughly 11,150,000 yen. Of course, this is only an illustrative estimate based on an assumed rate of return — it’s not a guarantee of actual investment performance — but it does show how the unlimited tax-free holding period makes it much easier to put long-term compounding to work.

当サイト限定！最大100,000円キャッシュバック！

Withdrawal rules and things parents should watch out for

Junior NISA didn’t allow withdrawals until the child turned 18, and that “you can’t use it when you actually need it” restriction was a common complaint. Kodomo NISA eases that: from around age 12 (roughly when a child starts junior high school), withdrawals for education or living expenses are expected to be allowed, subject to conditions such as the child’s own consent. Before junior high age, withdrawals are, in principle, not allowed except in limited cases such as natural disasters.

Exactly what paperwork or procedures a withdrawal will require — whether a school tuition invoice needs to be submitted, or whether it can be handled entirely at the financial institution’s counter — hasn’t been fully finalized as of this writing. Those details are expected to be settled through further government ordinances and each institution’s own procedures, so it’s worth checking for updates as the launch date approaches.

There are a few other things to keep in mind. As with any mutual fund investment, there’s no principal guarantee, and the account’s value will move with the market. Losses in an NISA account also can’t be offset against gains in a taxable account, same as adult NISA. And because a parent putting money into a child’s account is legally treated as a “gift,” it’s worth keeping Japan’s annual gift-tax exemption of 1,100,000 yen per recipient in mind. The account is managed by the child’s legal guardian, but the assets legally belong to the child, and the whole premise is that the money gets used for the child’s own benefit, such as education costs. In our house, we’re prioritizing our kids’ education and exam-prep costs, so even once Kodomo NISA launches, we plan to keep contributing at a comfortable, sustainable pace (I’ve also written before about our approach to financial education for our kids).

Looking ahead: what to think about before the January 2027 launch

To wrap up, here are three things worth thinking about before Kodomo NISA launches.

(1) Start comparing brokerages now — if you already have an adult NISA account somewhere, opening a Kodomo NISA account at the same brokerage will likely be the smoothest option.
(2) Weigh a comfortable, sustainable contribution amount against your own household’s education and exam-prep costs, starting now.
(3) Watch for further announcements — details like the exact fund lineup and withdrawal procedures are still expected to be finalized before launch.

There’s still a bit of time before this program actually starts, but having another option for building up our kids’ future education funds feels like genuinely good news for parents. Let’s keep at it, slow and steady. See you next time!

日本語版はこちら → こどもNISA解説（日本語版）

* This article is for informational purposes only and does not recommend any specific investment. Please make investment decisions at your own responsibility.

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