We received a nice email from a reader last month, and I agreed to answer their questions in a blog post (that's how desperate for content we are!) ;)

There was quite a bit of context to the questions, but we aren't going to run it in order to protect their privacy. Here are the questions:

1. ​Did you and your wife ever consider moving to the UK?
2. I'm not sure where I will live in the future, how should I invest? Should I worry about exchange rates?
3. Should I pay off my student loan at 1-1.5% with savings, or invest/keep the cash to use in the medium-term?

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These are good questions, and I don't think there are clear answers to them. Here are my thoughts:

​1. My wife and I have considered moving to the UK, but will probably not do so. My wife's parents live here in Sendai and will need her help going forward. Our children live in Singapore, Sweden, and Sendai. I grew up in Spain and don't feel particularly attached to the UK. My immediate family now live in Spain, Sweden, and the UK. I can't imagine what I would do if I returned to the UK (work in a petrol station?) and the weather/climate doesn't agree with me. The UK government is currently actively hostile to immigrants, and even getting a spouse visa for my wife would be a rather involved process. If some or all of these were different we would consider it, but for now it seems we will remain based in Sendai and travel to other places as wanted/needed.

2. There are three main parts to this question: which company or country to invest through, what investments to buy, and what currency to use.

Unless you are from the US, investing here in Japan is a pretty good option. The online brokers are relatively easy to use, NISA and iDeCo provide tax-free investing, and you can use tax-reporting accounts to avoid paperwork. Another option is to invest outside of Japan (using Interactive Brokers, for instance). This has the benefit of being in English and allowing you to keep your accounts if you leave Japan, but doing your taxes becomes more work.

In terms of what investments to buy, I'm a fan of buying the world economy through low-cost index funds. There are other approaches though. You can learn more about asset allocation by reading some of the things on our further reading page.

Apart from bonds, it probably doesn't matter what currency your investments are denominated in. The value of the underlying assets should remain the same even if the currency moves. This is why I moved most of my remaining pounds into world stock index funds recently. I fear the value of the pound may fall in the future, but if I own real assets the value of those assets in pounds will rise accordingly. I'm not a fan of hedging (insuring against currency risk) due to the higher costs involved. 

3. Whether it is better to pay off loans or invest is going to be a perennial discussion here. There is no right answer. It will depend on your personal preferences regarding debt and the return you might get on your investments (which you can't know in advance).

The rule of thumb is that the higher the interest rate the more attractive paying it off becomes. 1-1.5% is not particularly high, so that doesn't help us make the decision.

I think there is value in having an emergency fund, so it is probably worth keeping at least some of your savings liquid.

Whether you prefer the sure thing of reducing your debt or the uncertainty of making or losing money investing is going to ultimately decide this question for you.


Anyone else have advice for our reader? Divergent opinions most welcome!
Also, if you have more questions for me I'd be happy to answer them in a future blog post.

A happy 'problem' to have today. Due to a fortunate series of events, it looks like I will have about a million extra yen this year. I'm wondering what I should do with it. Obviously if it were a million dollars, I would know exactly what to do.

I've already maxed out my NISA account for the year. I figure my main options are: 

1. invest it in a taxable account
2. pay down my mortgage
​3. buy a Honda RR600

Appealing though option 3 is, my wife would KILL me if the bike didn't, so I'm inclined to go with option 1 or option 2. 

INVEST

If I were to invest in a taxable account I would probably buy some index funds and dividend paying shares in my Rakuten Securities account.

One interesting alternative might be to open an Interactive Brokers account and start buying index funds in there for diversification/portability purposes (I could keep the account if we ended up leaving Japan in the future). I am probably overly concerned with the implausible scenario that we are forced to leave Japan at short notice for some reason.

MORTGAGE

I currently owe just over nine million yen on my mortgage, with about 28 years left to pay. I don't receive the tax break on mortgages as our manshon was over twenty-five years old when we bought it and I wasn't able to get certification for it. Our montly payment is under 30,000 yen. Current interest on the loan is floating at 0.5%.

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I'll be honest and say I am not feeling super-excited about any of these options. Perhaps there is a better one? Please let me know in the comments.

What do you think? What would you do in my situation?

A few weeks ago a reader posted some information about checking your credit in Japan, so of course I decided to check it out for RetireJapan.

There are three credit bureaus in Japan: CIC, JICC, and the snappily named 全国銀行協会個人信用情報センター. Today we'll be looking at the JICC process and results.

It's a little bit involved, but not difficult.

The whole process took four days, from making the application on Sunday night to receiving the documents by registered mail on Wednesday.

First, you need to download the JICC app. You make the application and upload documents using the app.

Then, pay 1,000 yen with a credit card.

Finally, sign for the letter with your results in person.

So what was my score? I was a bit disappointed to find that they didn't provide one. No number I can humble-brag about ;)

What the report does show is all the loans, contracts, and credit cards I currently have open, as well as recently closed ones. It shows availabe and used credit. I don't have any, but presumably it would also show late payments or defaults.

It found my mortgage and current credit cards. It also found my old Softbank installments (so buying a phone over two years seems to count as a loan) and lots of closed credit cards.

I was pleased not to find any unfamiliar cards or loans.

So is it worth getting your credit report from JICC? Probably not. It is useful to check for unusual activity. It might be worth doing before an important mortgage application, just to make sure everything is okay, but probably not essential. It might also be worth doing if you are getting turned down for credit cards and aren't sure why.

I also found this full-service law firm that will do all the paperwork to check your credit report with all three bureaus and then explain the results to you. They charge 10,000 yen though, just over three times what it would cost you to do yourself (and you probably don't need to check all three so maybe even more). Given how easy it was to check JICC, this probably isn't necessary.

How about you? Have you ever checked your credit in Japan? Are the other two bureaus any different from JICC?

A couple of months ago I read something about rental properties in Japan, which made me start thinking about loans, which made me take a look at some loan comparison sites, which led me to the Tokyo Star Bank Mortgage Secured Loan.

On paper, this loan looks incredible. You can borrow up to 100 million yen, for up to 20 years, at an interest rate of 0.8-8.6% (that's quite a range). The loan is backed on a property, but you don't have to own the property (it can be owned by a family member).

The loan can be used for any non-commercial purpose, so of course I started thinking about what would happen if I borrowed, say, 15 million yen for twenty years and just put it into a cheap world stock ETF.

Obviously we already have a mortgage so couldn't borrow against our flat, but my in-laws have a paid-off house and might be willing to play along with this.

I popped into the Sendai branch of Tokyo Star Bank, but unfortunately they are not allowed to deal with this type of loan so referred me to the Ikebukuro Branch in Tokyo.

Strike one.

The Ikebukuro Branch got in touch and sent me an information pack and application materials.

Rather than a preliminary application, this was a full application that requires me to submit all the paperwork you might imagine, and also requires the owner of the property to do the same.

A fair amount of work and I still didn't know what the interest rate was likely to be or how much we'd be allowed to borrow.

Strike two.

So I called Tokyo again and asked them to give me an idea of the interest rate and possible loan size based on my situation. Obviously I wasn't going to run around getting documents and talking to my father-in-law if there was a possibility that the bank was going to turn around and offer me 2 million yen at 6% :)

Unfortunately I was told that they couldn't tell me anything until the results of the official credit check, at which point they would offer me an interest rate and confirm how much we could borrow based on the property. After a lot of pushing the person I was talking to confirmed there was a good chance the interest rate would be over 2%.

Strike three. I'm out.

Now, this deal obviously seemed a bit too good to be true. I asked what I'd have to do to get 0.8% but the rep wasn't able to say much more than having a large income and valuable property, along with all the usual credit-check type stuff.

So I suspect this was a classic bait and switch.

Advertise an amazing rate, then after people have gone through all the hassle of the application process offer them a more normal rate and hope they'll take it.

The loan also has a 108,000 yen fee, and I would have had to go to Tokyo to close the deal.

This was an interesting experience, but unfortunately didn't work out this time. How about you? Any good loan stories? What other amazing financial products are out there?