Japan's 2026 deduction reform and the 1.78 million threshold
Japan raised both of its main personal deductions for 2026. The headline effect is that salary up to JPY 1,780,000 now carries no national income tax, replacing the much discussed 1.03 million wall. The less publicised effect is that national and local tax now run on different bases.
The two deductions that moved
The employment income deduction floor rose from JPY 650,000 to JPY 740,000, and the income up to which that flat floor applies rose from JPY 1,900,000 to JPY 2,200,000. The basic deduction reached JPY 1,040,000 for total income up to JPY 4,890,000, tapering to JPY 670,000 and then JPY 620,000 at higher incomes.
Add the two floors together and you get JPY 740,000 plus JPY 1,040,000, which is the JPY 1,780,000 figure.
The deduction at each salary
| Gross salary | Employment deduction | Basic deduction |
|---|---|---|
| JPY 1,780,000 | JPY 740,000 | JPY 1,040,000 |
| JPY 3,000,000 | JPY 980,000 | JPY 1,040,000 |
| JPY 5,000,000 | JPY 1,440,000 | JPY 1,040,000 |
| JPY 7,000,000 | JPY 1,800,000 | JPY 670,000 |
| JPY 10,000,000 | JPY 1,950,000 | JPY 620,000 |
The employment deduction is capped at JPY 1,950,000 once salary passes JPY 8,500,000, and the basic deduction steps down as total income rises, so the benefit is concentrated in the lower and middle of the range.
Residence tax did not move
This is the part worth internalising. The reform applies to national income tax only. The local inhabitant tax basic exemption stays at JPY 430,000. For 2026 the national and local taxable bases therefore differ by JPY 610,000 at the common tier and must be calculated separately. A calculator that applies the new, larger deduction to both will overstate your take-home pay.
Part of it is temporary
The JPY 1,040,000 basic deduction applies for 2026 and 2027. The published schedule shows the lowest income band settling at JPY 990,000 from 2028, so some of the increase unwinds. Separately, from 2027 the reconstruction surtax splits into a 1.1% reconstruction component and a new 1% defence component, leaving the combined 2.1% unchanged.
The Japan salary calculator applies both deductions and keeps the two bases separate. See also the residence tax guide.