Japan's tax and social insurance rules contain several points at which earning a little more can leave a part-time worker, often a second earner in a household, worse off. Many people limit their hours to stay below them, which is why the walls have become a labour-shortage issue and a regular political target.
The income tax wall moved first. For decades it was 1.03 million yen of salary. The 2025 tax reform raised it to 1.6 million yen, and the 2026 reform to 1.78 million yen for 2026 income. The social insurance walls work differently. The so-called 1.06 million yen wall was a monthly wage test of 88,000 yen for joining employer health and pension insurance; it was abolished on 1 October 2026, so part-timers at covered employers now join if they work 20 hours a week or more. Covered employers are those with 51 or more insured staff for now, falling to 36 from October 2027, with the size test phased out by 2035. The 1.3 million yen wall is the income limit for being a dependant in a spouse's or parent's health insurance. Since April 2026 it is judged from the pay set out in the employment contract, so unplanned overtime no longer pushes someone over; the limit is 1.5 million yen for those aged 19 to 22.
Employers add walls of their own. Many Japanese companies pay a family allowance for a spouse only while the spouse earns below a set figure, often tied to one of the statutory walls.
What it means for a foreign employer
- Part-timers may ask for fewer hours. Staff near a threshold often cap their hours in the last months of the year. Plan rosters for it.
- The cost of part-time staff is rising. The removal of the wage test brings more short-hour workers into social insurance, with the employer paying half.
- Review family allowances. A spouse allowance tied to an income limit encourages the behaviour the government is trying to remove, and is increasingly seen as outdated.
Sources
- Fiscal 2025 and 2026 tax reform legislation (basic and employment income deductions).
- Act Partially Amending the National Pension Act and Related Acts, enacted June 2025; Japan Pension Service, notice on abolition of the wage requirement from 1 October 2026.
- Ministry of Health, Labour and Welfare, notice on dependant recognition based on employment contracts from April 2026.