Americans in Japan: the money questions
Japan taxes Americans differently depending on exactly how long they have lived there, which is the single fact most cross-border plans in Japan get wrong. The five-of-ten-years non-permanent-resident rule determines whether foreign income is taxed at all; NISA and iDeCo are genuinely useful Japanese accounts that do nothing to shield a US taxpayer from PFIC rules; a national exit tax can apply to long-term residents with a large securities portfolio who leave; and Japan's inheritance tax can reach worldwide assets based on residence history rather than nationality, with no US–Japan estate treaty to prevent double taxation.
- Non-permanent resident status — foreign-source income is only taxed in Japan if remitted there, until five years of residence within the preceding ten is exceeded, after which worldwide income is in scope.
- NISA and iDeCo are not PFIC-safe — Japanese tax-free treatment is irrelevant to US tax law, and most Japan-domiciled funds inside either account are PFICs for a US taxpayer.
- The exit tax — long-term residents with ¥100 million or more in securities or derivatives can be taxed on unrealised gains when they leave Japan.
- No US–Japan estate tax treaty — Japan's inheritance tax can reach worldwide assets based on the residence history of the deceased or the heir, with no treaty to prevent double taxation against US estate tax.
Japanese tax residence and status
The rule that decides whether your worldwide income is even in scope.
- Am I a permanent or non-permanent resident for Japanese tax purposes? — An American without Japanese nationality is generally a 'non-permanent resident' for Japanese tax as long as they have had a domicile or residence in Japan for five years or less within the preceding ten years. Non-permanent residents are taxed on Japan-source income plus any foreign-source income actually paid in or remitted to Japan; everyone else who is tax-resident is taxed on worldwide income.
- Does Japan have an exit tax, and could it apply to me? — Yes. Japan's national exit tax applies to a resident who, on leaving Japan, holds securities, unsettled margin positions or unsettled derivatives worth ¥100 million or more, provided they have had a Japanese address or residence for more than five years within the ten years before departure. The unrealised gain on those assets is treated as if sold at the time of departure and taxed, though deferral is available if a tax agent is appointed and security is provided before leaving.
- Does Japan tax inheritance my children receive from me in the US? — Possibly, on worldwide assets. Japan's inheritance tax reach depends on the residence history of the deceased and the heir rather than nationality: an heir living in Japan, or one connected to a long-term Japanese resident, can face Japanese inheritance tax on assets located anywhere in the world, including in the United States, and there is no US–Japan estate or gift tax treaty to prevent double taxation.
Investing, pensions and equity
NISA, iDeCo, the 401(k)/IRA under the treaty, and RSUs.
- Are NISA and iDeCo PFIC problems for Americans in Japan? — Japan's tax-free treatment of NISA and iDeCo has no bearing on US tax: both accounts can still hold Passive Foreign Investment Companies, and most Japan-domiciled mutual funds and ETFs are PFICs for US taxpayers. NISA generally only lets US persons buy Japanese securities in practice, while iDeCo contribution options may be restricted to Japanese funds — so Americans typically use these accounts narrowly, if at all, rather than assuming either one is automatically safe.
- Can I keep my US brokerage account once I move to Japan? — Some US custodians keep serving existing clients who move to Japan, usually with restrictions on new purchases or account types, while others close or convert accounts tied to a Japanese address. There is no single industry answer, so this is worth confirming with your specific provider before you move rather than after a notice arrives.
- How is my 401(k) or IRA taxed if I retire in Japan? — A 401(k) or traditional IRA can generally stay invested while you live in Japan, with withdrawals typically taxable in Japan as pension income once you are Japan tax resident, while the US also taxes the same distribution as a citizen's worldwide income; a foreign tax credit is generally the mechanism used to avoid paying full tax twice on the same withdrawal. The treaty position and ordering of returns should be confirmed with preparers on both sides before you begin drawing the account.
- Are my RSUs taxed twice between Japan and the US? — Not if handled correctly, but it takes active work. Japan generally taxes RSU income at vesting as employment income, sourced by the portion of the vesting period worked in Japan, while the US taxes the same vest as a citizen regardless of location; a workday-sourcing analysis and a properly claimed US foreign tax credit are what prevent the same income from being taxed in full by both countries.
Social Security, property and retiring in Japan
Totalization, buying property or an akiya, and what retirement actually costs.
- Does the US–Japan totalization agreement cover my Social Security? — Yes, generally. The US–Japan Social Security agreement, in force since 1 October 2005, prevents paying into both countries' systems on the same earnings and allows periods of coverage in each country to be combined (totalized) so people who worked in both can qualify for benefits they might otherwise miss. It covers US Social Security and the main Japanese pension and health insurance systems, but not Japan's National Pension Fund, Employees' Pension Fund or the non-contributory Old-Age Welfare Pension.
- Should I buy property — including an akiya — in Japan as an American? — Japan does not generally restrict foreign nationals from buying real estate, including an abandoned akiya house, so the purchase itself is usually straightforward. The planning work is on the US side: the property is a reportable foreign asset, renovation and holding costs on an akiya can be substantial and are easy to underestimate, and resale liquidity in rural areas is often much lower than the low purchase price suggests.
- How much money do I need to retire in Japan as an American? — There is no single figure — the honest answer depends on whether you are in central Tokyo or a smaller city, your visa route, whether you are on Japan's national health insurance, and how your US retirement income is taxed once you are Japan tax resident. The number that matters is not a published average but a plan built from your own spending, visa status and account structure.