Japan updates tax deductions and social insurance rules

Recent updates to Japan's tax and social security systems are altering the financial landscape for workers and dependents. Under the FY2026 tax reforms, the income threshold for the full 380,000 yen spousal special deduction will rise from 1.6 million yen to 1.69 million yen, with the eligibility for the deduction extending to spouses with annual salary income of up to 2.07 million yen. This change is scheduled to take effect during the December year-end adjustments.

Regarding social insurance, the “1.06 million yen wall” for short-term workers was abolished in October 2026, removing the previous monthly wage requirement of 88,000 yen. However, the “1.3 million yen wall” remains a critical threshold; exceeding this annual income level requires individuals to leave their spouse's health insurance dependency and enroll in National Health Insurance and the National Pension system independently.

For those retiring or changing employment status, it is essential to manage transitions between Employees' Pension Insurance and the National Pension. Individuals under 60 who are not covered by employees' pension insurance must switch to being Category 1 insured persons under the National Pension. Failure to complete these procedures within 14 days of leaving a job can impact future pension benefits and eligibility for disability or survivor pensions. Those facing financial hardship due to unemployment may be eligible for premium exemptions or deferrals.