If you’ve started researching NISA, Japan’s tax-free investment account, you’ve probably run into two confusing terms: the “Tsumitate Investment Allowance” and the “Growth Investment Allowance.” This guide skips the basics of NISA eligibility (foreign residents are generally eligible under the same rules as everyone else) and focuses on what actually matters once you’re in: how these two allowances differ, and how to use both together strategically — including how they compare to the retirement accounts you may already know from the US, the Roth IRA and 401(k).
Tsumitate vs Growth Allowance at a Glance
The Big Change: You Can Now Use Both at Once
Under the old NISA system (through 2023), you had to choose either the Tsumitate NISA or the General NISA for the entire year — not both. Since the 2024 overhaul, these have been renamed the Tsumitate Investment Allowance and the Growth Investment Allowance, and critically, you can now fund both in the same year. This is the single biggest change that makes the “combine both allowances” strategy in this guide possible.
What Actually Differs Between the Two
| Feature | Tsumitate Allowance | Growth Allowance |
|---|---|---|
| Annual limit | JPY 1.2 million | JPY 2.4 million |
| Lifetime limit | No separate sub-cap (within the overall JPY 18M) | Capped at JPY 12 million |
| Eligible investments | A curated list of low-cost, diversified index funds approved by Japan’s FSA | Individual listed stocks, ETFs, REITs, and mutual funds (some high-risk products excluded) |
| Buying style | Mostly recurring, scheduled purchases | Both recurring purchases and one-time lump-sum buys |
| Tax-free holding period | Unlimited | Unlimited |
How NISA Compares to a Roth IRA or 401(k)
If you’re used to US retirement accounts, a few differences stand out. For 2026, the IRS set the 401(k) employee contribution limit at $24,500 (plus an $8,000 catch-up for those 50+), and the IRA/Roth IRA limit at $7,500. Roth IRA eligibility also phases out for single filers earning between $153,000 and $168,000. NISA has no income limit at all, and unlike a Roth IRA or 401(k), it isn’t a retirement-specific account — there’s no early-withdrawal penalty and no age restriction on taking money out. In exchange, NISA’s combined annual allowance (JPY 3.6M, roughly $24,000 at typical exchange rates) sits in a similar ballpark to maxing out a 401(k) alone, and its JPY 18M lifetime cap is a hard ceiling with no equivalent in the US system, where 401(k)/IRA limits simply reset every year with no lifetime maximum.
Splitting JPY 3.6 Million a Year Between the Two
Combine the Tsumitate Allowance (JPY 1.2M) and Growth Allowance (JPY 2.4M) and you get up to JPY 3.6 million a year in tax-free investment room. The two allowances work completely independently — not fully using one doesn’t block you from using the other. But keep in mind: unused annual allowance does not roll over. Whatever you don’t invest by December 31st is gone for good, not carried into the next year.
💡 Run your own numbers — try the US Capital Gains Tax Calculator (2026).
The Catch in the JPY 18M Lifetime Cap: Growth Tops Out at JPY 12M
The combined lifetime tax-free holding limit is JPY 18 million, but there’s an important catch: no more than JPY 12 million of that total may come from the Growth Allowance. In other words, you can never reach the full JPY 18M using the Growth Allowance alone — at least JPY 6 million must come through the Tsumitate Allowance. The Tsumitate Allowance, by contrast, has no separate sub-cap, so in theory you could fill the entire JPY 18M lifetime limit using only the Tsumitate Allowance.
If your plan is to lean heavily on individual stock picking through the Growth Allowance, budget for hitting that JPY 12M ceiling and plan to route the rest through Tsumitate-eligible index funds.
Selling Frees Up Allowance — But Not Immediately
Another feature of the current NISA system: when you sell a holding, your lifetime allowance is restored by an amount equal to the original purchase price, not the sale price. Sell shares you bought for JPY 3M for JPY 5M, and only JPY 3M of allowance comes back — not JPY 5M.
The timing matters too: that freed-up allowance only becomes usable starting the following year, not immediately. Sell in 2026, and you can’t reuse that allowance until 2027. Japan’s Financial Services Agency has requested a same-year restoration rule in past tax reform proposals, but this change was not adopted in the 2026 tax reform outline. If you’re planning to sell and rebuy quickly, this one-year lag is worth building into your plan.
💡 Tip: Want to see exactly when your monthly contributions will fill each allowance? Try our NISA Allowance Calculator — enter your monthly amounts and it estimates the date.
Three Practical Scenarios
| Situation | Suggested Strategy |
|---|---|
| Just getting started | Fill the Tsumitate Allowance with recurring monthly purchases first, then add individual stock picks through the Growth Allowance as extra funds allow |
| You have a lump sum to invest | Use the Growth Allowance (up to JPY 2.4M/year) first, but plan ahead so you don’t run into the JPY 12M lifetime cap sooner than expected |
| You already hold an old-style NISA account | Old NISA holdings are tracked separately from the new JPY 18M lifetime cap — don’t add your old account’s balance when calculating how much of the new limit you’ve used |
A Related 2026 Proposal Worth Knowing About
Japan’s tax reform outline published in December 2025 includes a proposal for a separate Tsumitate-style allowance for residents aged 0 to 17 (JPY 600,000/year, JPY 6 million lifetime). This would be an entirely new program, distinct from the adult allowances covered in this guide, intended for accounts held in a child’s name. Whether and how it’s implemented is still subject to official confirmation.
Frequently Asked Questions
Q. Can I use the Tsumitate and Growth Allowances in the same year?
A. Yes. Since the 2024 NISA overhaul, the two allowances work completely independently, so you can contribute up to JPY 1.2M to the Tsumitate Allowance and JPY 2.4M to the Growth Allowance in the same calendar year. The old system required choosing only one for the whole year.
Q. Can I fill the entire JPY 18M lifetime limit using only the Growth Allowance?
A. No. The Growth Allowance is capped at JPY 12 million of the JPY 18 million total lifetime limit. The remaining minimum of JPY 6 million must come from the Tsumitate Allowance.
Q. Does unused annual allowance carry over to next year?
A. No. Both the Tsumitate Allowance (JPY 1.2M/year) and Growth Allowance (JPY 2.4M/year) reset each year — whatever you don’t use is lost, and you simply get a fresh allowance the following year.
Q. If I sell an investment, is my allowance restored the same day?
A. No. Selling restores allowance equal to the original purchase price, but that restored allowance only becomes usable starting the following calendar year, not immediately. This wasn’t changed in Japan’s 2026 tax reform outline.
Key Takeaways
- Since the 2024 overhaul, you can fund both the Tsumitate Allowance (JPY 1.2M/yr) and Growth Allowance (JPY 2.4M/yr) in the same year.
- The combined lifetime cap is JPY 18M, but no more than JPY 12M of it can come from the Growth Allowance.
- Unused annual allowance does not carry over — it’s lost at year-end if not used.
- Selling restores allowance equal to the purchase price, but only usable starting the following year, unlike a same-year reset.
This article is for general informational purposes only and is not investment advice regarding any specific security or product. NISA’s detailed rules and eligible products are set by Japan’s Financial Services Agency and individual brokerages and can change, so confirm the latest official details before investing, and consult a qualified tax or financial professional for your specific situation. All investing carries the risk of loss.