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How Do I Open An Offshore Bank Account From Japan?

Contributed by Tyton Capital Advisors
27 September, 2017

Anyone living in Japan for longer than a tourist visa has experienced the usual headaches associated with local retail banking. Applications, brochures, terms and conditions, etc. all in Japanese; possible lack of universally accepted ATM cards, lack of debit cards, lack of functional online banking, unattractive F/X rates, lack of international investments... the list goes on. Most people that are not necessarily looking for anything special or flashy; all they want is an easy account, in a language they can read, with an ATM/debit card they can use anywhere in the world, and with convenient services. More often than not, the best answer is to open an offshore bank account.

What is an offshore bank account?

An offshore bank account is simply an account which is not domiciled in your country of residence. However, a typical offshore account would also likely be domiciled in a location separate from your home country as well.  Depending on your nationality, an offshore account is likely to offer better international portability and access, wider investment selection, and overall better service designed for international professionals.  Simply put, "the local bank" is great in each of our respective hometowns, but not so convenient when you are halfway around the world.

Is it legal to open an offshore account?

Thanks to Hollywood depictions of offshore banking, as well as the recent Panama Papers; the question of legality as pertains to offshore banking is sure to come across nearly every client's mind at some point. Simply put, yes, it is legal to open up a bank account.  The key is being sure that you make all necessary disclosures to your country of residence and possibly your home country. The potential illegality of offshore banking arises when people take advantage of the confidentiality that it can provide in order to hide assets or hide income from the tax office- or in the case of the Panama Papers, politicians hiding their side dealings. It is however worth noting that any foreigners living in Japan for less than 5 out of the previous 10 years are not taxable on foreign earned income not remitted to Japan (the five year rule).  In addition, it is not required to report foreign assets under 50 Million JPY or currency equivalent in total value. So long as you follow the simple rules related to reporting and fulfill any tax obligations, you are free to enjoy all the benefits of offshore banking.

Key benefits of opening an offshore account:

  • International Portability
  • Confidentiality
  • Reduce currency risk
  • Asset protection
  • Wider investment selection
  • International diversification
  • Easily access money outside of Japan

In addition to the above benefits of setting up an offshore bank account is the issue of sovereign risk or country risk.  In other insights articles we have talked about the typical risks an investor would come across in the normal course of their career such as credit risk, market risk, or currency risk.  Another primary risk to consider is sovereign risk.  Sovereign risk is, simply put, the risk that some change in the domestic government, public policy, or legal code could directly impact your savings or access to your savings, as well as the risk of a government defaulting on its debt.  It should come as no surprise that this type of risk is not typically associated with Japan, as it a famously stable country.  In fact, the JPY is often referred to as "safe haven" currency.  For instance, Japan is not likely to experience unexpected hyper-inflation of +200% in a single year, nor will it go through a radical political revolution anytime soon.  Cash held in Japan is relatively safe.  That said, Japan also has a worryingly high level of government debt outstanding, and anyone holding JPY should bear this in mind when looking to the mid to long term.  In addition, there is another side to this coin that could still fall under the heading of 'sovereign risk' or 'country risk' as it pertains to your savings. This is the risk of creeping capital controls.


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