TOKYO -- Restrictions and requirements are discouraging parents in Japan from setting up tax-exempt investment accounts for their underage children.
Just 41,707 so-called junior NISA accounts were open at 10 major brokerages as of April 30, one month after the program's launch, data released Monday by the Japan Securities Dealers Association showed.
With these accounts, opened in minors' names, capital gains and dividends from annual investments up to 800,000 yen ($7,200) in stocks and investment trusts made by parents or grandparents are tax-free for five years.
Japan's 22 million youths under age 20 are eligible for the junior version of the regular NISA tax-savings plan open to adults. The number of junior accounts opened so far is underwhelming, association Chairman Kazutoshi Inano said.
The market downturn since the start of the year has cooled investor sentiment in general. Three additional factors are prompting parents to give the cold shoulder to the junior investment plan.
One is the restriction on withdrawals. Regular NISA accounts allow withdrawals at any time, but money cannot be taken out of minors' accounts, even after selling stocks, until the owner turns 18. This limit is designed to promote long-term savings such as for college but many investors see it as inconvenient.
Investors also find setting up an account too complicated. Applications for junior NISA accounts require not only the child's identification but also a family registry proving the relationship between the child and parents.
Privacy concerns are another issue. With the rollout of the taxation and social security number system, individual identification numbers were added in January to the list of requirements when applying for any securities account. Account openings declined in January, the securities trade group reported, as investors apparently felt uncomfortable sharing their numbers with brokerages.