Japanese global index funds
There are a number Japanese-domiciled index funds that represent the global stock market, including developed countries, emerging markets, and Japan in a single fund.
This page summarises some of the low-cost (less than 0.2% management fee) options.
The Funds
| Fund name | Net annual management fee | Assets (September 2023) | Represented Index | Methodology | Japanese name | Japanese fund link |
|---|---|---|---|---|---|---|
| eMaxis Slim All Country | 0.05775% | ¥1,438 billion | MSCI All Country World Index | Buys stocks directly to represent the index price (via "mother funds" managed by the same company). | ｅＭＡＸＩＳ Ｓｌｉｍ 全世界株式（オール・カントリー） | link |
| Tawara No-load Whole World | 0.1133% | ¥8.7 billion | MSCI All Country World Index | Buys stocks directly to represent the index price (via "mother funds" managed by the same company). | たわらノーロード 全世界株式 | link |
| Rakuten Whole World Index | 0.132% | ¥334.9 billion | Bogleheads:FTSE Global All Cap Index | Wraps up the US-domiciled VT, VTI, and VXUS ETFs. | 楽天・全世界株式インデックス・ファンド | link |
| SBI Whole World Index | 0.1102% | ¥136 billion | Bogleheads:FTSE Global All Cap Index | Wraps up the US-domiciled SCHB (55%), SPDW (35%), SPEM (10%) ETFs. | ＳＢＩ・全世界株式インデックス・ファンド | link |
| SBI V Whole World Index | 0.1338% | ¥28.9 billion | Bogleheads:FTSE Global All Cap Index | Wraps up the US-domiciled VT ETF. | ＳＢＩ・Ｖ・全世界株式インデックス・ファンド | link |
| Smart-i Select Whole World Index | 0.1144% | ¥0.883 billion | MSCI All Country World Index | Buys stocks directly to represent the index price (via "mother funds" managed by the same company). | Smart-i Select 全世界株式インデックス | link |
Comparison with US ETFs
The management fees for these funds are between 0.1% to 0.3%. This is higher than if buying a similar US-based ETF such as VT, which has a management fee of 0.07%. The SBI V fund is the most directly comparable, because it is directly wrapping up VT, so the added costs can be seen clearly.
Although the fees for these Japanese funds are higher than their American counterparts, there are benefits over buying US ETFs for residents of Japan:
- No currency conversion costs.
- Even the budget brokers SBI and Rakuten charge 0.25 yen per dollar to convert currency: ¥250 for a $1000 conversion, ¥2500 for a $10,000, etc.
- SBI has a cheaper rate of ¥0.06 per dollar if you do the currency conversion in a linked SBI Sumishin Net Bank account.
- Lower transaction costs.
- Foreign ETFs may have trading fees that apply when both buying and selling
- Japanese funds are not subject to these costs
- Reinvestment of dividends, allowing capital gains to be deferred.
- Eligible for Tsumitate NISA and iDeCo tax-protected accounts.
- Less US withholding tax (in the case of eMaxis Slim - see the triple taxation problem section below).
- Points programs.
- The major Japanese online brokers (Rakuten, SBI & Monex) all offer points programs which payout for holding Japanese funds
- Return rates are generally between 0.03% to 0.05%, which brings Japanese fund management costs closer to those of US ETFs
- Credit card points can be collected when paying for Japanese funds, lowering effective purchase costs (typically 0.5% to 1.1% back)
The triple taxation problem
International stocks are subject to withholding tax on dividends in the country of origin.
For a Japanese global fund, this means there are two levels of taxation for any foreign components:
- Withholding tax paid to the country of origin
- Japanese dividend tax
However, investors may choose to invest in US-ETFs such as VT, or Japanese funds that wrap up US ETFs, such as the Rakuten or SBI funds listed above.
In this case, US Withholding tax of 10% is applied to the dividends from the funds. For US ETFs and Japanese funds that wrap up ETFs there are three levels of taxation:
- Withholding tax paid to the country of origin
- US Withholding tax of 10% on the entire dividend (except the US portion, already covered by the above point)
- Japanese dividend tax of 20.315％ on the entire dividend
It is important to consider that US ETFs, and the Rakuten and SBI global funds, pay 10% US dividend tax on all foreign stocks. Japanese domiciled funds such as eMaxis Slim All Country / Tawara no-load only need to pay US taxes on the US portion of the dividend, not the entire dividend.
US withholding taxes are especially worth being aware of when using tax-advantaged accounts such as NISA and iDeCo, because while these are free of Japanese taxes, foreign withholding tax must still be paid. This means that for a US-domiciled fund or a Japanese-domiciled fund that is 100% reselling a US-domiciled fund, even tax-protected accounts will be paying two kinds of withholding tax on foreign non-US stocks (country of origin + US taxes).
See Also
- Shintaro Money's guide to global index funds (in Japanese)
- Shintaro Money's guide to Japanese broker point programs (in Japanese)
- Fund of the Year (in Japanese)
Credits
Many thanks to the following RetireWiki.jp users for writing this article: