Key Facts
• Government plans 2026 tax reform targeting ultra-wealthy with expanded additional taxation.
• Current taxable income threshold of ¥3 billion to be lowered.
• Aim: Address ‘1 billion yen barrier,’ where tax burden decreases for incomes over ¥100 million.
• Income tax rate for salaries can reach 55%, while financial income is taxed at 20%.
• Ministry of Finance: Tax burden averages 25.9% for ¥50-100 million income, drops to 20.1% for ¥1-2 billion.
• 2023 reform introduced 22.5% tax on incomes exceeding ¥3.3 billion after deductions.
• Current system affects 200-300 individuals with incomes over ¥3 billion.
• New measures may include reducing deductions or raising tax rates.
• Broader taxation risks cooling investor sentiment and lowering stock prices.
• Final details to be included in ruling party’s tax reform outline by year-end.
• October agreement to abolish gasoline and diesel tax surcharges prompted focus on ultra-wealthy taxation to offset ¥1.5 trillion revenue loss.
Summary
The Japanese government and ruling parties are preparing a 2026 tax reform to expand additional taxation on ultra-wealthy individuals. The current threshold of ¥3 billion in annual income will be lowered to address the ‘1 billion yen barrier,’ where tax burdens decrease for incomes exceeding ¥100 million. This reform builds on a 2023 measure targeting 200-300 individuals with incomes over ¥3 billion. Proposed changes include reducing deductions or increasing tax rates, potentially broadening the number of affected taxpayers. However, concerns remain about the impact on investor sentiment and stock market performance. The final plan will be detailed in the ruling party’s year-end tax reform outline. This initiative also aligns with efforts to offset a ¥1.5 trillion revenue shortfall following the planned abolition of gasoline and diesel tax surcharges.
