Japanese employees talk about pay in two ways: the gross figure, gakumen, and what lands in the bank, tedori. The gap is made up of social insurance, which is a roughly flat share of pay up to the caps, and income tax and inhabitant tax, which are progressive.
For an employee in Tokyo whose employer is in the Japan Health Insurance Association, the fiscal 2026 employee rates are 9.15% for pension, 4.925% for health insurance, 0.5% for employment insurance and 0.115% for the new child and child-rearing support levy, about 14.7% in total. From age 40 to 64, long-term care insurance adds 0.81%. Income tax runs from 5% to 45% of taxable income, plus a 2.1% reconstruction surtax on the tax, and inhabitant tax adds a flat 10%. At the top, the combined marginal rate is about 56%. In practice, at 2026 rates a single employee in Tokyo keeps roughly 78% of a 5 million yen salary and about 72% of 10 million yen, so the familiar rule of thumb of 70 to 80% holds across that range.
Two features make tedori move in ways candidates notice. Pension and health contributions are capped, so their share falls for high earners while income tax rises. And inhabitant tax is paid a year in arrears, based on the previous year's income. Someone in their first year of work in Japan pays almost none, which inflates first-year tedori; someone whose pay jumps pays the new rate only from the following June, and someone whose pay falls keeps paying on the old, higher income.
What it means for a foreign employer
- Candidates compare in net terms. A senior candidate weighing your offer often thinks about what changes each month in the bank. Model the tedori, not only the gross.
- Watch the inhabitant tax lag. A candidate moving to a higher salary will see a jump in inhabitant tax a year later. Someone joining from overseas will see one in their second year. Warn them, or the second year feels like a pay cut.
- Equity changes the picture. Income from vesting shares or exercised options granted by a foreign parent is usually not withheld through payroll, so the employee pays at filing. Tedori overstates their real net pay in a vesting year.
- Net-pay guarantees are expensive. For assignees on tax-equalised packages, high Japanese marginal rates mean grossing up costs more than many regions budget for.
Sources
- Japan Health Insurance Association, fiscal 2026 rates (Tokyo); Japan Pension Service; Ministry of Health, Labour and Welfare, fiscal 2026 employment insurance rates.
- JAC Recruitment, take-home pay on a 10 million yen salary (Tokyo, age 40, single, updated July 2026); Kurashi no Keisanki (calclife), take-home pay on a 5 million yen salary (2026).
- Income Tax Act, Article 89; Act on Special Measures for Securing Financial Resources for Reconstruction (reconstruction surtax); Local Tax Act (inhabitant tax).