This is an English translation of our Japanese article. This policy is still under discussion and the details change at each stage; the Japanese version and the official materials of the National Tax Agency and the Ministry of Finance are authoritative. For individual tax decisions, consult a tax office or a licensed tax accountant.
Last updated: 19 August 2026. Based on published materials from the National Tax Agency, the Ministry of Finance and the Democratic Party for the People, checked as of August 2026.
The short answer. Japan's retail government bonds (kojinmuke kokusai) are not exempt from inheritance tax, and no such exemption has been decided. A bill submitted to the House of Councillors on 10 July 2026 mentions inheritance tax, but only as a clause asking the government to consider it — not as a provision that grants the exemption. The proposal also covers only bonds bought inside a NISA account, so the NISA lifetime limit would effectively cap any benefit.
What is actually happening
| When | What happened |
|---|---|
| June 2026 | An inheritance tax reduction for retail JGBs is floated within the Liberal Democratic Party; the Democratic Party for the People argues for adding JGBs to NISA |
| 10 July 2026 | The Democratic Party for the People submits the "JGB NISA bill" to the House of Councillors |
| July 2026 | Finance Minister Satsuki Katayama says the government is accelerating work on making retail JGBs more attractive, including new product design |
| Late July 2026 | Criticism reported that the inheritance tax idea has a strong flavour of tax relief for the wealthy |
| August 2026 | Nothing is decided. The FY2027 tax reform discussion at year end is the next milestone |
The driver is who will hold Japanese government bonds. As the Bank of Japan reduces its purchases, the government wants households — long-term, stable holders — to take up more. Households currently hold only a very small share of JGBs.
The bill: exemption is only "to be considered"
The formal title is the "Bill on measures for income tax exemption on income from government bonds under the small-amount investment tax exemption system". It was submitted by Yuichiro Tamaki and five other members.
What the bill would enact
Add government bonds to NISA-eligible products, making interest and capital gains tax-free inside a NISA account.
What the bill only asks to be "considered"
Exempting the bonds from inheritance tax when the holder dies. The bill itself does not remove inheritance tax.
Even if this bill passed, a separate amendment to the Inheritance Tax Act would be needed to change the inheritance treatment. It is also an opposition-sponsored bill, and the government has been cautious, so passage is not assured.
How retail JGBs are valued for inheritance tax today
Valuation for inheritance tax
Face value + accrued interest − early redemption adjustment
The National Tax Agency values retail JGBs at the amount you would receive on early redemption, because redemption is guaranteed by law after roughly one year and the amount is knowable. The early redemption adjustment is set by the Ministry of Finance as the last two interest payments (before tax) × 0.79685. The coefficient reflects the 20.315% withholding on interest.
A worked example
A floating-rate 10-year bond with a face value of 10,000,000 yen, a current rate of 0.6% (30,000 yen per half-year before tax), three months after the last coupon:
| Item | Amount |
|---|---|
| Face value | 10,000,000 yen |
| Accrued interest (30,000 × 3/6) | +15,000 yen |
| Early redemption adjustment (30,000 × 2 × 0.79685) | −47,811 yen |
| Inheritance tax value | 9,967,189 yen |
That is about 0.3% below face value — far too small to call a tax-saving strategy. In practice it is close to holding cash in a bank account.
When the holder dies, heirs may redeem early even within the first year. The same exception applies if the holder suffered damage in a qualifying disaster.
Would it really be the ultimate inheritance tax strategy?
It depends entirely on the cap. Under the proposal as it stands, the answer is no.
The bill covers bonds bought inside a NISA account. NISA has a lifetime investment limit of 18 million yen, so an inheritance exemption tied to NISA would be capped at roughly that amount.
| Method | Exempt or reduced amount |
|---|---|
| Life insurance proceeds | 5 million yen × number of statutory heirs |
| Death retirement benefits | 5 million yen × number of statutory heirs |
| Small-scale residential land | 80% reduction up to 330 m2 |
| Retail JGBs (if enacted) | Up to about 18 million yen if tied to NISA |
With three statutory heirs, life insurance alone already provides 15 million yen of exemption, and the small-scale residential land relief is usually far more powerful. An 18 million yen allowance is not trivial, but it would be one more option on top of existing tools, not a replacement.
If, on the other hand, the LDP idea covers retail JGBs generally with no NISA cap, the picture changes completely — and that is precisely where the criticism is aimed.
Why there is criticism
- It favours the wealthy. Only estates above the basic exclusion (30 million yen + 6 million × heirs) pay inheritance tax at all, so the relief reaches only that group.
- Fairness across asset types. The same amount held in deposits or shares would be taxed, while bonds would not.
- Tension with the purpose of NISA. NISA was designed to move households "from savings to investment"; near-principal-guaranteed bonds sit awkwardly with that.
- Lost revenue. A wider exemption means less inheritance tax collected.
Supporters counter that stable household holdings help absorb JGB issuance as the Bank of Japan steps back, and note that among G7 countries issuing retail bonds, Japan is the one without preferential tax treatment.
The road ahead
- End of August: ministries file tax reform requests for the next fiscal year
- Autumn: the ruling party tax commission debates
- December: the ruling party tax reform outline is decided — only then is it close to settled
- January–March: legislation passes the Diet
- April onward: entry into force
So the first real test is whether it appears in the FY2027 tax reform outline in December 2026. Until then, treat it as undecided. See also how to read Japan's tax reform requests.
What to do today
- Do nothing in a hurry. Restructuring assets around an undecided rule is backwards.
- Check whether your estate is even liable, using the basic exclusion of 30 million yen + 6 million × statutory heirs.
- If it is, make sure you have already used the reliefs that are certain today — see the inheritance tax basic exclusion and reliefs.
- Watch the December tax reform outline. If it is not there, nothing changes that year.
FAQ
Are retail JGBs already free of inheritance tax?
No. As of August 2026 they are fully taxable. The value is face value plus accrued interest minus the early redemption adjustment. The exemption is only a proposal.
If the JGB NISA bill passes, does inheritance tax disappear?
No. The inheritance tax part is a clause asking the government to consider the idea. A separate amendment to the Inheritance Tax Act would still be required.
Should I move cash into JGBs now?
Not for inheritance tax reasons. The current valuation is only about 0.3% below face value, so the difference from a bank deposit is negligible.
How much would be exempt if it happened?
Under the proposal it would be limited to bonds inside a NISA account, so the 18 million yen lifetime limit would be the effective cap. The design is not settled.
Can heirs redeem within the first year?
Yes. Early redemption is normally allowed only after one year, but death of the holder is an exception, as is damage from a qualifying disaster.
Sources
- National Tax Agency: Valuation of retail government bonds
- Ministry of Finance: FAQ on early redemption of retail JGBs
- Ministry of Finance: Retail government bonds
- Democratic Party for the People: submission of the JGB NISA bill (10 July 2026)
This article is general information. For individual tax decisions, consult a tax office or a licensed tax accountant. The policy is undecided and may change.