Japan Ruling Bloc OKs Taxable Income Hike, Other Tax Reforms

Tokyo, Dec. 19 (Jiji Press)--The ruling bloc of the Liberal Democratic Party and the Japan Innovation Party (Nippon Ishin no Kai) adopted on Friday a tax system reform package for fiscal 2026, including a rise in the taxable income threshold to 1.78 million yen.

The threshold will rise from the current 1.6 million yen in line with an agreement struck with the opposition Democratic Party for the People. The new level will apply from 2026 for people with annual incomes of up to 6.65 million yen.

The threshold is the sum of the basic deduction for all income earners and the employee income deduction for salaried workers. Both levels will be raised by 40,000 yen to reflect inflation.

Also, a temporary measure will be taken in 2026 and 2027 to raise the total deductions to 1.78 million yen for people with an annual income of 6.65 million yen or less.

Annual income tax payments will decrease by between 4,000 yen and 36,000 yen per person as a result, according to a government estimate, leading to a tax revenue decrease of 650 billion yen per year.

[Copyright The Jiji Press, Ltd.]