Japan's government and ruling coalition are finalizing a comprehensive tax reform package for the 2025 fiscal year that will significantly impact both residents and travelers. The proposed changes include adjustments to income tax thresholds, extensions to housing loan deductions, and a notable increase in the departure tax for anyone leaving the country. Income Tax Threshold Adjustments One of the most significant proposals addresses the so-called "income wall" (年収の壁) that affects workers' take-home pay. According to NHK, the Liberal Democratic Party (LDP) is proposing a new mechanism that would link the basic income tax deduction to consumer price inflation, with reviews conducted every two years. This represents a shift from the current static threshold system that has remained unchanged despite rising living costs. The LDP's tax commission confirmed on December 9th that they plan to present specific proposals to their coalition partner, the Democratic Party for the People (Kokumin Minshuto), seeking agreement on raising these income thresholds. For foreign residents working in Japan, this reform could mean that tax-free income allowances would automatically adjust with inflation, potentially reducing the tax burden as prices rise. Housing Loan Deduction Extension In response to soaring property prices across Japan, the government is adjusting the mortgage interest deduction system (住宅ローン減税) to make homeownership more accessible. According to NHK's December 9th report, the ruling coalition is coordinating to extend the housing loan tax deduction program for five years while increasing the borrowing limit for used homes to 35 million yen. Currently, the deduction allows homebuyers to reduce their taxable income based on their outstanding mortgage balance. The proposed changes would particularly benefit families with children, who would receive additional deduction allowances beyond the standard limit. For expats considering purchasing property in Japan, this extension provides continued tax incentives through 2030, though specific details about eligibility requirements for foreign residents have not yet been announced. The focus on used homes is particularly relevant for the expat community, as newly constructed properties often carry premium prices. The increased borrowing limit of 35 million yen for used homes represents a significant boost that could make homeownership more financially viable for foreign residents settling in Japan long-term. Departure Tax Increase In what may be unwelcome news for frequent travelers, the government is considering tripling the departure tax. NHK reports that officials are moving forward with plans to raise the International Tourist Tax (国際観光旅客税), commonly known as the departure tax, from its current 1,000 yen to 3,000 yen per departure. This tax, which applies to everyone leaving Japan regardless of nationality, was introduced in 2019 to fund tourism infrastructure and promotion. The proposed increase comes as foreign visitor numbers have rebounded strongly following pandemic-related travel restrictions. For expats who regularly travel internationally for work or personal reasons, this change would add approximately 2,000 yen to each trip's cost. The departure tax is typically included in airline ticket prices and collected at the time of booking, so travelers won't need to pay separately at the airport. However, those who frequently return to their home countries or travel regionally for business should factor this increased cost into their travel budgets. Looking Ahead These tax reforms are currently in the final coordination stages, with the government expected to finalize details by mid-December as part of the 2025 fiscal year tax revision. Foreign residents should monitor official announcements from the National Tax Agency and consider consulting with tax professionals to understand how these changes might affect their individual circumstances. While the income tax adjustments and housing loan extensions generally favor taxpayers, the departure tax increase represents a clear cost increase for internationally mobile residents. As Japan continues balancing fiscal needs with economic stimulus, expats should stay informed about how these evolving policies impact their financial planning.