If the macro and governance case for Japanese equities has convinced you — or even just made you curious — the next question is practical: how do you actually buy Japanese stocks from outside Japan?

The good news is that access has never been easier. The less good news is that the method you choose matters more than you might think, because it affects your costs, your universe of investable stocks, your currency exposure, and your tax obligations. This guide walks through the main options from simplest to most direct.

Option 1: Japan-Focused ETFs (Simplest)

The lowest-friction way to gain exposure to Japanese equities is through an exchange-traded fund that tracks a Japanese index. These trade on your home stock exchange in your local currency, eliminating the need to deal with foreign exchange, time zone differences, or unfamiliar trading platforms.

For US-based investors, the most liquid options include:

The iShares MSCI Japan ETF (EWJ) is the largest and most widely traded Japan ETF in the US, with over $15 billion in assets. It tracks the MSCI Japan Index, providing broad exposure to large and mid-cap Japanese companies across sectors including industrials, financials, consumer discretionary, and technology. The expense ratio is approximately 0.50%.

The WisdomTree Japan Hedged Equity Fund (DXJ) offers Japan equity exposure with a built-in hedge against yen depreciation relative to the US dollar. This is worth considering if you believe the yen will weaken — but note that if the yen strengthens, the hedge works against you. The hedging mechanism also adds cost and can create tracking differences. DXJ tends to outperform unhedged alternatives when the yen is weakening and underperform when it is strengthening.

The JPMorgan BetaBuilders Japan ETF (BBJP) tracks the Morningstar Japan Target Market Exposure Index with a lower expense ratio of approximately 0.19%, making it one of the cheapest options for broad Japan exposure. For cost-conscious investors seeking passive Japan exposure, BBJP is difficult to beat.

The Franklin FTSE Japan ETF (FLJP) is another low-cost option at approximately 0.09% expense ratio, tracking the FTSE Japan Capped Index.

For European investors, UCITS-compliant options include iShares Core MSCI Japan IMI UCITS ETF, Xtrackers MSCI Japan UCITS ETF, and Vanguard FTSE Japan UCITS ETF, among others. Most are available in both currency-hedged and unhedged versions.

For Australian investors, the iShares MSCI Japan ETF (ASX: IJP) and Betashares Japan ETF – Currency Hedged (ASX: HJPN) are the primary options listed on the ASX.

Advantages: Simplicity, low minimums, immediate diversification, trades in your local currency and time zone, no foreign account needed.

Limitations: You are buying the index, which means exposure to the broad market but no ability to select individual companies. Expense ratios, while modest, compound over time. Currency-hedged versions add complexity and cost. You miss the most compelling opportunities in mid-cap and small-cap Japanese companies that are not well represented in major indices.

Option 2: American Depositary Receipts — ADRs (US Investors)

For US-based investors who want exposure to specific Japanese companies without opening an international brokerage account, American Depositary Receipts offer a middle ground.

ADRs are certificates issued by US banks representing shares of foreign companies, traded on US exchanges in US dollars. Major Japanese companies with ADRs include Toyota Motor (TM), Sony Group (SONY), Mitsubishi UFJ Financial Group (MUFG), Honda Motor (HMC), and SoftBank Group (SFTBY), among others.

Advantages: Trade in USD on familiar US exchanges. No foreign account or currency conversion needed. Covered by major US brokerage platforms with zero or low commissions.

Limitations: The universe is very limited. Only the largest Japanese companies have ADRs — perhaps 50-60 names out of roughly 3,800 listed on the TSE. This means you cannot access the mid-cap and small-cap companies where many of the most compelling governance reform stories are playing out. ADR pricing may occasionally diverge from the underlying share price due to trading hours and currency movements. ADR fees (typically $0.01-0.05 per share) are deducted from dividends.

Option 3: Direct Access via International Broker (Most Comprehensive)

For investors who want full access to the Tokyo Stock Exchange — including mid-cap, small-cap, and companies not available as ADRs or in ETFs — opening an account with an international broker that offers TSE access is the most powerful approach.

Interactive Brokers (IBKR) is the standout platform for most international investors. It offers direct access to the Tokyo Stock Exchange with over 11,000 listed Japanese securities. Commissions are competitive (typically 0.05% of trade value with a ¥80 minimum), and the platform supports multi-currency accounts, allowing you to hold yen balances and avoid repeated conversion costs. IBKR is available to investors in most countries and supports sophisticated order types, research tools, and portfolio analytics.

One practical consideration: Japanese stocks trade in lot sizes (tangen), typically 100 shares. This means the minimum purchase for a stock trading at ¥5,000 per share is ¥500,000 (roughly $3,300 at recent exchange rates). Some blue-chip stocks with higher share prices can require ¥1 million or more per lot. IBKR handles lot-size requirements automatically, but be aware that position sizing for Japanese individual stocks requires more capital than US stocks, where single shares can be purchased.

Saxo Bank is another option, particularly for European and Asian investors (note that Saxo does not accept US clients). Saxo charges approximately 0.08% of trade value with a ¥800 minimum for Japanese stock trades. The platform offers a clean interface and is well-suited to investors who want direct TSE access without the complexity of IBKR’s professional-grade platform.

Charles Schwab and Fidelity offer some international trading capabilities for US-based clients, though the range of Japanese stocks available may be more limited than what IBKR provides.

Advantages: Full access to the entire TSE universe, including companies with the most compelling reform stories. Ability to hold yen and manage currency exposure. Lower costs for active traders. Access to research and tools designed for international investing.

Limitations: More complex account setup. You need to manage foreign exchange exposure (which can be an advantage if the yen appreciates). Trading hours are during Japanese market hours (9:00-15:30 JST, which is 00:00-06:30 UTC), which may be inconvenient depending on your time zone. Tax reporting may be more complex — consult your tax advisor.

Currency Considerations

Currency exposure is one of the most important — and most misunderstood — aspects of investing in Japanese equities from overseas.

When you buy a Japanese stock denominated in yen, your total return in your home currency consists of two components: the change in the stock price in yen, and the change in the yen/home currency exchange rate.

If the yen strengthens against your home currency, this adds to your return. If the yen weakens, it detracts. This currency effect can be substantial — the yen moved roughly 15% against the dollar in 2023 and has remained volatile since.

For investors who believe the yen is currently undervalued — and there are strong arguments for this given the yen’s multi-decade lows and the prospect of narrowing interest rate differentials as the BOJ normalizes and the Fed potentially cuts — the currency exposure is an additional source of potential return, not merely a risk to be hedged away.

However, currency movements are inherently unpredictable. If you are uncomfortable with the volatility, currency-hedged ETFs or hedging strategies through your broker can reduce the impact. Just be aware that hedging has costs that reduce long-term returns.

Tax Considerations

Tax treatment of Japanese equity investments varies significantly by country and by the investment vehicle you use. This is an area where professional tax advice is essential, but here are the broad strokes.

Dividend withholding tax. Japan withholds tax on dividends paid to foreign investors. The standard withholding rate is 20.42%, but this may be reduced under a tax treaty between Japan and your country of residence. The US-Japan tax treaty, for example, reduces the rate to 10% for qualifying investors. This tax may be reclaimable as a foreign tax credit on your home country tax return — check with your advisor.

Capital gains tax. Japan generally does not tax capital gains on Japanese stocks held by nonresident investors (unless the investor owns 25% or more of the company). Your home country will typically tax the gains under its normal rules.

ETFs and ADRs may have additional layers of tax complexity. ETF dividends may be subject to both Japanese withholding tax and your home country’s tax rules. ADR holders may face withholding at the ADR bank level. Again, consult your tax advisor for your specific situation.

Practical Steps to Get Started

Here is a straightforward sequence for an overseas investor who wants to begin building Japanese equity exposure:

Start with a Japan ETF through your existing brokerage account. This requires no new account setup and gives you immediate, diversified exposure. Choose between hedged and unhedged versions based on your currency view.

Open an Interactive Brokers account if you want direct TSE access. The process is straightforward and typically takes a few days. You will need to provide identification, proof of address, and financial information. Once approved, enable permissions for the Tokyo Stock Exchange in your account settings.

Fund your account and consider your currency strategy. You can trade Japanese stocks with your home currency (IBKR will handle the conversion), or you can proactively convert a portion of your balance to yen to avoid repeated conversion costs.

Research individual Japanese companies. The Japan Exchange Group publishes English-language information on listed companies at JPX.co.jp. Many larger Japanese companies also publish English-language investor relations materials. The TSE’s list of companies disclosing PBR improvement plans is a useful starting point for identifying governance reform beneficiaries.

Start with liquid, well-known names and expand your universe as you become more familiar with the market. The TOPIX Core 30 or TOPIX 100 components are good starting points.

Key Japan-Focused Resources in English

Here are some resources for staying informed about Japanese markets in English:

Nikkei Asia covers Japanese business and markets in English and is the most comprehensive English-language source for Japan-specific financial news.

Japan Exchange Group (JPX) publishes market data, listed company information, and governance reform progress in English.

The Bank of Japan publishes monetary policy decisions, economic outlooks, and flow of funds data in English.

The Financial Services Agency publishes governance reform programs and regulatory updates in English.

Major investment banks — including J.P. Morgan, Goldman Sachs, Morgan Stanley, and Nomura — publish Japan equity strategy research, though most is behind paywalls. Summaries and key conclusions often appear in financial media.

A Note on Timing

Japan’s stock market has already risen significantly from its 2022 lows, and some investors may worry they have missed the opportunity. The Nikkei 225 exceeded 40,000 for the first time in 2025, and the TOPIX has been setting records. The TOPIX rose approximately 38% over the trailing twelve months through early 2026.

However, in my view, the structural transformation driving Japanese equities is still in its early stages. Corporate governance reform is accelerating, not decelerating. Buybacks are projected to reach new records, potentially exceeding ¥20 trillion in FY2025. The inflation regime shift is becoming entrenched after 45 consecutive months above the BOJ’s target. And foreign investors, while returning, are still rebuilding positions that were reduced over the “Lost Decades.”

Despite the rally, Japanese equities still trade at a significant valuation discount to US equities — roughly 36% on a forward P/E basis. If the governance reforms and inflation normalization continue to deliver, this discount should narrow over time.

Daiwa Asset Management projects TOPIX at 3,750 by end-2026 and 4,000 by end-2027. Major institutional investors including J.P. Morgan, Invesco, and Janus Henderson maintain constructive outlooks. The consensus is increasingly bullish, but actual portfolio positioning — particularly among Western allocators — still appears to be catching up.

Timing the market is notoriously difficult, and I would never suggest that Japanese stocks cannot experience pullbacks or corrections. They can and will. The BOJ’s policy normalization, yen volatility, and global macro shocks could all trigger drawdowns. But the direction of the structural forces — governance reform, inflation normalization, policy support, and capital return — favors Japanese equities over a multi-year horizon.

For investors who are new to Japan, a reasonable approach is to build exposure gradually. Start with a broad ETF for immediate exposure, then add individual stock positions as you develop familiarity with the market. Dollar-cost averaging (or yen-cost averaging) into positions over several months smooths out timing risk and reduces the psychological burden of making a single large allocation decision.

The most common regret in investing is not failing to time the bottom perfectly. It is failing to participate at all.

I am Hyottoko Sennin, a pen name. I have spent 30 years in Japan’s institutional investment industry and currently run a PIPE advisory firm in Tokyo. This article represents my personal views and does not constitute investment advice. Past performance does not guarantee future results. All investments involve risk, including the potential loss of principal. Please consult a qualified financial advisor before making investment decisions.