Special Defense Income Tax: How Much More Will You Pay?

How Much Will the Special Defense Income Tax Increase Your Burden? Checking the "¥385,000 over 10 years" Estimate

Starting in January 2027, a new Special Defense Income Tax that adds 1% on top of your income tax amount will take effect. An estimate that "if you earn ¥7,000,000 a year, your burden will increase by ¥385,000 over 10 years" has been spreading, but this calculation multiplies the wrong number. The surtax is levied on the income tax amount, not on taxable income. Posts that spread in late October calling it "a tax hike to fund aid to Ukraine" are also inaccurate. This article shows the correct calculation method so you can work out your own increase from a single withholding tax statement. It then sorts out, in a timeline, exactly when the burden actually increases and by how much.

First, Check the Details of the System Against Primary Sources

The National Tax Agency's Q&A describes the details of the reform as follows[NTA].

The Ministry of Finance's pamphlet likewise explains: "So that household burden does not increase for now, we are cutting the Special Reconstruction Income Tax rate by one point, from 2.1% to 1.1%. At the same time, to reliably secure the total reconstruction funding, we are extending the taxation period by 10 years"[MOF]. In other words, the design keeps the amount you pay now unchanged while extending the payment period by 10 years.

Funding for the defense budget rests on three pillars — income tax, corporate tax, and tobacco tax — and the corporate tax portion (the Special Defense Corporate Tax) already began in April 2026. We've mapped out the whole system in The Mechanics of the Defense Tax Increase and Its Effect on Take-Home Pay. This article focuses specifically on calculating your own income tax portion.

"A 1% Income Tax Hike Next Year to Fund Ukraine" Gets Two Things Wrong

In late October 2026, posts on X claiming that "income tax will go up by 1% next year to fund aid to Ukraine" spread widely. Checked against primary sources, the claim is wrong on two points: what the money is for, and when the burden rises.

What surprised us while researching this was that in January 2027 many people will actually see less income tax withheld on their pay slips. That's because withholding switches to the "Withholding Tax Tables for 2027," which reflect the higher basic deduction[NTA] — it has nothing to do with the Special Defense Income Tax. Conversely, income tax will rise for tax year 2028 when the extra basic deduction ends, but that isn't caused by the Special Defense Income Tax either. Amounts by income level are in Japan's 1.04 Million Yen Basic Deduction Ends After 2027.

Where the "¥385,000 over 10 years" Estimate Goes Wrong

The estimate that has spread takes the form "taxable income of ¥3,500,000 × 1.1% × 10 years = ¥385,000." The multiplication itself is correct, but it applies the 1.1% to the wrong number.

Taxable income and the income tax amount are completely different numbers. With taxable income of ¥3,500,000, the income tax amount is roughly ¥280,000 — less than a tenth as much. The 1.1% should be applied there, but applying it to taxable income instead inflates the result more than tenfold.

The Real Increase Happens in Three Phases

It isn't "1.1% for 10 years" either. Compared with a world where the reform never happened, here is how the difference in burden moves.

The key is the middle period. For the 10 years from 2038 to 2047, the full 2.1% combining defense and reconstruction is added where the surtax would otherwise have been zero if there had been no reform. That's 2.1%, not the 1.1% used in the estimate that has been circulating. And from 2048 onward, the Special Defense Income Tax's 1% continues with no defined end date.

Check It With Your Own Numbers — Using Your Withholding Tax Statement

So this doesn't stay hypothetical, try calculating it from your own withholding tax statement. All you need is the single figure in the "withholding tax amount" box.

1. Look at the "withholding tax amount" on your withholding tax statement. This figure already includes the Special Reconstruction Income Tax (2.1%).
2. Divide it by 1.021. This gives you the base income tax amount. For example, ¥286,000 becomes ¥280,000.
3. 1% of that is the annual Special Defense Income Tax. For ¥280,000, that's ¥2,800.
4. The increase for the years 2038 through 2047 is 2.1 times that amount, over 10 years. For ¥280,000, that's about ¥59,000.

We cover how to read a withholding tax statement itself in How to Read a Withholding Tax Statement, and how to calculate take-home pay in Calculating Take-Home Pay From a Withholding Tax Statement.

Because the surtax is proportional to the income tax amount, the effect of progressive taxation carries straight through. Someone with an income tax amount of ¥3,000,000 bears 10 times the burden of someone with ¥300,000. Despite the modest impression the "1%" figure gives, the actual distribution skews toward higher earners.

For Investors: Only the Breakdown of the 20.315% Changes

The 20.315% rate levied on dividends from listed shares and capital gains in specified brokerage accounts is also a figure made up of withheld income tax plus a surtax. Here too, only the breakdown changes — the overall rate itself won't move for the time being.

Without the reform, the rate would have dropped to 20% starting in 2038, so the way to look at it is that the rate stays 0.315 points higher for the following 10 years, and 0.15 points higher from 2048 onward. Investments inside an NISA account are tax-exempt, so none of this applies there (see our New NISA Utilization Guide).

Procedures Don't Change for Employees or Freelancers

As a system, this is a significant change, but the procedures for those who have tax withheld don't change.

• Monthly withholding — The calculation method does not change because of the Special Defense Income Tax, since the combined rate remains 2.1%. The switch to the 2027 tax tables in January 2027 is due to the higher basic deduction mentioned above.
• Fees and manuscript payments — Withholding on speaking fees, manuscript fees and similar payments to freelancers also stays at a combined 10.21% (20.42% on the portion of a single payment above ¥1 million), so neither the amount deposited nor invoice calculations change[NTA].
• Year-end adjustment — Income tax, the Special Defense Income Tax, and the Special Reconstruction Income Tax are settled together, so employees don't need to submit any additional paperwork.
• Payment — The three withheld taxes are paid together as a single total on one payment form.
• Withholding tax statement — How to enter it on statutory reporting forms is laid out in the National Tax Agency's Q&A. This is about the only point that requires checking on the practical side.

The Next Funding Question: Defense Spending Above ¥10 Trillion a Year and a Possible Corporate Tax Increase (October 2026)

With the revision of the three national security documents planned for the end of the year, defense spending is reported to be likely to swell to more than ¥10 trillion a year (the Ministry of Defense's FY2026 budget is about ¥9 trillion)[Kyodo News]. Here is how the funding debate moved in October.

• October 17 — An additional corporate tax increase emerged within the government as a stable funding source for defense spending (according to multiple people involved)
• October 20 — Keidanren Chairman Tsutsui opposed it, saying it would "dampen the expansion of investment"[Jiji Press]
• October 27 — At an expert panel at the Prime Minister's Office, members said "stable funding should be secured without assuming bond issuance" and "tax increases should not be ruled out"
• From early-to-mid November — The ruling parties' tax council begins discussing the FY2027 tax reform[Jiji Press]

As of reports through October 28, the tax being named is corporate tax; no proposal to raise the income tax rate further has come up. That means a new funding debate is starting less than a year after the 1% income tax was settled. If the year-end tax reform outline includes decisions that affect individuals' burden, we will add them to this article. For what the outline is expected to decide, see FY2027 Tax Reform Outline: The Eight Items December Decides.

Frequently Asked Questions

Summary

• From January 2027 (Reiwa 9), the 1% Special Defense Income Tax begins and the Special Reconstruction Income Tax falls to 1.1%, so the burden from 2027 to 2037 does not change.
• The increase comes in 2038 to 2047, when 2.1% of income tax is added, and from 2048 the 1% continues with no end date.
• For a single person earning ¥7,000,000 a year (assuming ¥280,000 in income tax), the increase is about ¥60,000 over 10 years; the claim of "¥385,000 over 10 years" wrongly applies the rate to taxable income.
• Calling it "a tax hike to fund aid to Ukraine" is also wrong; it is a tax to secure funding for strengthening Japan's own defense capabilities.
• You can estimate your own amount by dividing the withholding tax amount on your withholding tax statement by 1.021 and taking 1% of that.

References (Sources)

This article was prepared by checking the following published materials. Because details of the system may change with future reforms, please check the latest official information for practical use.

• National Tax Agency, "Special Defense Income Tax and Special Reconstruction Income Tax (Withholding) Q&A" (May 2026)
• National Tax Agency, "Overview of Withholding for the Special Defense Income Tax and Special Reconstruction Income Tax" (withholding from January 2027 onward)
• Ministry of Finance, "Tax Measures for Securing Financial Resources for Defense Capability Reinforcement" (FY2026 tax reform pamphlet)
• Ministry of Finance, "Outline of the FY2026 Tax Reform"
• Ministry of Finance, "Outline of the Bill on Special Measures for Securing Financial Resources Necessary for the Fundamental Reinforcement of Japan's Defense Capabilities"
• National Tax Agency, "Withholding Tax Tables for 2027"
• Kyodo News, "Corporate Tax Increase Emerges as Defense Funding Source; Spending Likely to Swell Above ¥10 Trillion a Year" (October 17, 2026, via Akita Sakigake Shimpo)
• Jiji Press, "No Permanent Funding in Sight for Defense Buildup" (October 28, 2026)
• Jiji Press, "Tax Reform Talks to Begin in Early-to-Mid November" (October 27, 2026)
• National Tax Agency, "Various Forms and Information Regarding the Special Reconstruction Income Tax"

* This article provides general information and does not guarantee individual tax amounts. Because your income tax amount varies with your deductions, please check the actual figures on your own withholding tax statement or tax return. For specific decisions, please consult your tax office or a tax accountant.