Glossary of everyday finance terms
Short, neutral definitions of the words used in the guides, with the Japanese name where it appears on forms and registers.
- AML (anti-money laundering)
- Rules and practices intended to stop money from crime being moved through banks and other financial firms as if it were legitimate. See ID checks explained.
- Beneficial owner (実質的支配者)
- The person who ultimately owns or controls a company. Firms covered by the Criminal Proceeds Act generally have to identify them when they deal with a legal entity.
- Compound growth
- Growth that is added to an amount which is already growing, so each period starts from a larger base. See the arithmetic in money basics.
- Deposit insurance
- A government-backed system, run by the Deposit Insurance Corporation of Japan, that protects some kinds of bank deposits up to a limit. It does not cover every product a bank sells.
- Diversification
- Spreading money across different kinds of assets so that one outcome does not decide everything. It lowers one kind of risk and does not remove the chance of loss.
- Emergency fund
- Money kept in an easily accessible deposit to absorb a job loss, a medical bill or a repair. The size is a personal judgement.
- FATF
- The Financial Action Task Force, an international body that sets standards against money laundering and terrorist financing. Countries write their own laws on that basis.
- Financial Instruments and Exchange Act (金融商品取引法)
- The Japanese law covering securities and many investment services, including registration of firms that deal in them or advise on them.
- FSA (金融庁)
- The Financial Services Agency, the government body that supervises banks, securities firms, insurers and other financial businesses in Japan.
- Inflation
- A general rise in prices over time, which means the same yen buys less.
- iDeCo
- An individual defined-contribution pension plan in Japan with tax treatment on contributions and, generally, no withdrawal until a set age. Conditions change; read the official page.
- Investment trust (投資信託)
- A fund that pools money from many people and invests it in a basket of assets. Its value can fall as well as rise and it is not a deposit.
- KYC (know your customer)
- The part of AML where a provider confirms who its customer is, usually with an official document, and records why the relationship exists.
- Kakeibo (家計簿)
- The household ledger: a notebook or app where income and spending are written down so the month can be seen as a whole.
- Money Lending Business Act (貸金業法)
- The Japanese law that requires lenders to register and sets conduct rules for consumer lending, including limits relative to a borrower's income.
- NISA
- A Japanese scheme under which gains and dividends from eligible investments held inside it are not taxed, within limits that are revised from time to time.
- Principal
- The original amount of money borrowed or invested, before interest or returns are added.
- Registered business
- A business that has registered with the competent authority for a regulated activity. Registration is a minimum condition, not an endorsement.
- Risk tolerance
- How much of a possible loss a person can stand, financially and emotionally, before the decision stops being sensible for them.