Japanese employers pay for the commute. No statute requires it, but candidates assume it, and a role that does not cover travel is seen as paying less than it says. The usual practice is to pay the cost of a commuter pass on the cheapest reasonable route, monthly or every few months.
For income tax, a commuting allowance for public transport is tax-free up to 150,000 yen a month, which covers almost any commute in practice. For people who drive or cycle, the tax-free amount is set by one-way distance. Those car and bicycle limits were raised for distances of 10 km and above by a cabinet order promulgated on 19 November 2025, applied retroactively to allowances payable from 1 April 2025, so 2025 payrolls had to be corrected at the year-end adjustment.
Social insurance treats it differently. The commuting allowance is part of the remuneration on which health insurance and pension contributions are calculated, so a long, expensive commute raises both the employee's and the employer's contributions. It can, however, be excluded from the base for overtime pay.
What it means for a foreign employer
- Pay it, and say so in the offer. A package without commuting costs looks smaller to a Japanese candidate than one with them, even if the totals match.
- Do not fold it into salary. Paying a higher salary "including transport" loses the tax exemption and raises the employee's income tax.
- Revisit it for hybrid work. Many employers now pay actual daily fares for people who come in a few days a week instead of a monthly pass. Write the rule down.
- Remember the social insurance cost. It is tax-free for the employee, not free for you.
Sources
- Income Tax Act, Article 9, and Enforcement Order, Article 20-2.
- National Tax Agency, notice on the November 2025 revision of tax-free limits for commuting allowances.
- Health Insurance Act, Article 3(5) (definition of remuneration).