Every year at the end of August, Japan's tax code for the following fiscal year starts moving. Ministries and agencies submit their tax reform requests to the Ministry of Finance (national taxes) and the Ministry of Internal Affairs and Communications (local taxes). From September, headlines announce that this or that will be "cut" or "expanded." One thing to hold on to: a request is not a decision. For FY2026, ministries filed 215 requests — and the gift tax exemption for lump-sum education funding, for which a three-year extension was requested, was simply allowed to expire in the December outline. Meanwhile the tripling of the international tourist tax, which appeared nowhere in the request list, surfaced in December out of nowhere. Here is how the next four months work, and how to read the coverage without being misled.
The four months that decide next year's tax code
- June
Professional bodies publish their recommendations
The Japan Federation of Certified Public Tax Accountants' Associations (JFCPTAA), the JICPA and industry groups publish their asks. For FY2027, the JFCPTAA adopted its recommendation paper on 25 June 2026.
- End of Aug
Ministries file their tax reform requests
Each ministry submits requests covering its policy area. For FY2026, 17 ministries and agencies filed as of 29 August. This is what gets reported as "Ministry X requests Y."
- Sep–Nov
Government and ruling-party tax commissions deliberate
Requests are reconciled against priorities and revenue. Many are dropped here. Coverage turns to "under coordination" or "likely shelved" — still nothing final.
- Mid-Dec
Ruling-party outline, then cabinet decision
This is where it is effectively settled. For FY2026 the ruling-party outline came on 19 December 2025 and the cabinet decision on 26 December. Tax increases also become public for the first time here.
- Feb–Mar
Bill submitted and enacted
The outline is drafted into an amendment bill and passed before the fiscal year ends. The FY2026 bill was submitted on 20 February 2026.
- Apr / Jan
Entry into force
Corporate, local and consumption tax changes usually apply from April; income tax, being assessed by calendar year, often applies from the following January.
In 2026, the refundable tax credit and the reduced consumption tax rate on food are moving ahead of the usual schedule. The cabinet adopted a basic policy on 5 August 2026, setting a direction without waiting for the December outline. See the refundable tax credit and the food consumption tax cut.
Requests are mostly pleas for tax cuts — the asymmetry in numbers
| Ministry / agency | Requests | Abolition / reduction |
|---|---|---|
| Land, Infrastructure, Transport and Tourism | 41 | 5 |
| Economy, Trade and Industry | 38 | 2 |
| Financial Services Agency | 23 | 0 |
| Health, Labour and Welfare | 22 | 0 |
| Agriculture, Forestry and Fisheries | 22 | 5 |
| Cabinet Office | 14 | 0 |
| Education, Culture, Sports, Science and Technology | 12 | 0 |
| Finance | 7 | 0 |
| Internal Affairs / Environment | 6 each | 0 |
| Children and Families Agency / Reconstruction Agency / Justice | 5 each | 11 (Reconstruction only) |
| Defense | 4 | 0 |
| Cabinet Secretariat / National Police Agency | 2 each | 0 |
| Foreign Affairs | 1 | 0 |
| Total | 215 | 23 |
Source: Ministry of Finance, "Status of FY2026 Tax Reform Requests (simple tally of requests filed by ministries as of 29 August)." Excluding overlaps between ministries: 146 requests and 13 abolition/reduction items.
Each ministry advocates for the industries and policies it oversees, so requests are almost entirely cuts, wider exemptions and extensions. Only 23 items sought abolition or reduction, most of them Reconstruction Agency measures reaching their end date. In other words, reading the entire August request list tells you nothing about next year's tax increases. Those are decided on the revenue side and appear for the first time in the December outline.
Requests do not necessarily pass: FY2026 in practice
Rejected: lump-sum education funding gifts
Under this measure, up to ¥15 million gifted in a lump sum for education costs was exempt from gift tax. The deadline was 31 March 2026. MEXT, jointly with the Financial Services Agency, requested a three-year extension to 31 March 2029. The FY2026 outline said: "the application deadline (31 March 2026) shall not be extended." Families planning around it had three months, from the December outline to the end of March, to decide. See lump-sum education funding gifts.
Partially granted: NISA
The FSA's FY2026 request had three pillars: revising the eligible age for the accumulation quota as child support, widening the range of eligible products, and restoring the tax-free holding limit within the same year. What the outline set out explicitly was opening the accumulation quota to ages 0–17 (annual quota ¥600,000, tax-free holding limit ¥6 million while the holder is 0–17). Not the whole request — the highest priority piece. See the child-support NISA and the new NISA guide.
Never requested, yet decided: three tax increases
| Item | Decided in the FY2026 outline |
|---|---|
| International tourist tax | Raised to ¥3,000 per departure (from ¥1,000) |
| Special defense income tax (provisional name) | A 1% surtax on income tax, from January 2027. The special reconstruction income tax rate is cut by 1% and its levy period extended by ten years to 2047 |
| Adjustment for extremely high incomes | Special deduction cut from ¥330 million to ¥165 million; rate raised from 22.5% to 30% |
See the departure tax rise to ¥3,000 and inheritance tax planning for the very wealthy.
FY2027: what is settled and what is still open
Already settled (enacted or cabinet-decided)
- Income tax threshold raised to ¥1.78 million as a special measure; basic deduction up by ¥40,000 and the minimum employment income deduction from ¥650,000 to ¥690,000
- A mechanism linking the basic deduction to price increases
- Single-parent deduction raised to ¥380,000 (income tax) and ¥330,000 (resident tax)
- Housing loan tax credit revised and extended five years
- NISA accumulation quota opened to ages 0–17
- Lump-sum education funding gift exemption ended 31 March 2026
- After the 20% invoice special measure ends, sole proprietors only may pay 30% of output tax for two years (2027 and 2028)
- Environmental performance levy abolished 31 March 2026; the provisional diesel oil delivery tax rate abolished 1 April 2026
- International tourist tax to ¥3,000; 1% special defense income tax from January 2027
- Basic policy on the refundable tax credit (cabinet decision, 5 August 2026); full introduction in FY2029
Still to be decided for FY2027
- Scope and transitional rules for the 1% consumption tax on food (April 2027, two years). The bill is still to come
- Benefit amounts, income tests and delivery mechanism for the refundable tax credit
- Whether to keep multiple consumption tax rates (the JFCPTAA recommends abolition plus direct benefits)
- The level of the basic deduction add-on from 2028 onward
- Comprehensive review of vehicle-related taxes
- The deadline for the 15% SME corporate tax rate
- Ministry requests themselves (known at the end of August 2026)
The settled items on the left are listed with their effective dates in our FY2026 tax reform summary. When reading coverage from September onward, checking that list first is the quickest way to avoid mistaking a request for a decision.
1. A request was filed (end of August — no certainty) → 2. It made the outline (December — near certain, but not yet drafted) → 3. The law passed (March — final). Household and business decisions should generally wait for stage 2. Do not buy, contract or gift on the strength of stage 1.
The tax accountants' recommendations are already out
The JFCPTAA adopted its FY2027 recommendation paper on 25 June 2026: 38 items in total, of which nine are priority recommendations — appropriate valuation of unlisted shares; a new gift and inheritance tax deferral scheme replacing the general business succession regime; income tax exemption where inherited unlisted shares are sold back to the issuing company; abolishing multiple consumption tax rates in favour of direct benefits; consolidating the refundable tax credit into finely graduated benefits by income; redesigning salary payment reports and income tax returns to speed up resident tax assessment; extending the SME corporate tax rate; revising the ordering of casualty loss deductions for specified severe disasters and creating a carry-back refund; and considering tax measures for the declining birth rate.
Items four and five run against the government's current direction: the government plans to cut the food consumption tax rate to 1% from April 2027, while the tax accountants argue for scrapping multiple rates entirely and using direct benefits instead — a view shaped by the practical burden of rate classification under the consumption tax filing rules. Historically, only a few of the 38 items survive into the December outline, but the paper repeats items year after year, and some are realised over several cycles.
Three checks for reading the September coverage
1. Whose request is it?
A ministry request carries more weight than one from an industry or professional body. Ministry requests are all published on the MOF site, so the detail a news story omits is available at source.
2. New measure or extension?
Extensions of expiring measures pass relatively often; brand-new exemptions and credits rarely do. But as the education gift exemption showed, extension requests are also rejected. Do not assume.
3. Is a revenue source named?
If a proposed cut or benefit comes without a funding explanation, expect it to shrink by December or arrive paired with an increase. The FY2026 special defense income tax was exactly that pattern.
What not to do
Do not bring forward a contract, purchase or gift on the basis of an August request or September speculation. If the outline changes the content, there is no undoing it. Move after the outline in mid-December.
FAQ
Q. When can I see the FY2027 tax reform requests?
A. They are filed with the Ministry of Finance and the Ministry of Internal Affairs and Communications at the end of August and published on the MOF website at the same time. For FY2026, 17 ministries and agencies filed 215 items as of 29 August 2025. Each item sets out the content, rationale, application period and estimated revenue loss in a standard form — more detail than news coverage carries.
Q. How likely is a request to be realised?
A. There is no single figure, but extensions of expiring measures pass relatively often while new measures rarely do. Even so, in FY2026 the three-year extension of the lump-sum education funding gift exemption, requested jointly by MEXT and the Financial Services Agency, was rejected and the measure ended. Do not treat a filed request as a done deal.
Q. Are tax increases included in the requests?
A. Almost never. In FY2026, only 23 of 215 items sought abolition or reduction. Ministries advocate for their own policy areas, so requests centre on cuts, expansions and extensions. Increases are decided from the revenue side and typically appear in the December outline. The tripling of the international tourist tax, the new special defense income tax and the tighter rules for extremely high incomes all became public only in the outline.
Q. What is the difference between "in the outline" and "enacted"?
A. The outline is the policy agreed by the ruling parties and the cabinet, published and adopted in mid-December. It is then drafted into an amendment bill submitted to the Diet in February and enacted in March. Content rarely changes materially after the outline, but detailed requirements are fixed during drafting, so specifics may need to wait for the bill and the implementing ordinances.
Q. Are the 1% food consumption tax and the refundable tax credit already decided?
A. The cabinet adopted a basic policy on 5 August 2026: the consumption tax rate on food and drink falls to 1% for two years from April 2027, and the refundable tax credit is fully introduced in FY2029. That is a policy decision, not legislation. The list of covered items, transitional measures and the design of the benefit will be settled through the coming bill.
Sources
This article is general information. Tax reform content can change at the outline, bill and ordinance stages; confirm effective dates and requirements against the enacted law. For individual matters, consult a tax office or a licensed tax accountant.