Foreign residents working in Japan may soon see significant changes to the country's tax system as the government moves forward with discussions to raise key income thresholds, commonly known as "income walls." These reforms could have substantial implications for part-time workers and families with multiple earners. On November 12, 2025, Japan's ruling Liberal Democratic Party (LDP) began high-level tax reform discussions through its Tax Research Commission, according to NHK. The meetings mark the start of deliberations on tax system revisions for the upcoming fiscal year, with the controversial "income walls" taking center stage in policy debates. The term "income walls" refers to specific earnings thresholds that trigger tax obligations and affect dependent deductions. The most prominent is the ¥1.03 million annual income threshold, beyond which workers must pay income tax and may lose dependent status on a spouse's tax return. This system has long influenced employment decisions, particularly among part-time workers who deliberately limit their hours to stay below these thresholds. Prime Minister Takaichi addressed the issue during a November 12 Upper House Budget Committee session, stating her commitment to finding common ground on raising the ¥1.03 million threshold, as reported by NHK. The Democratic Party for the People (DPP), a key opposition party, has been pushing aggressively for increases to these income limits as part of broader economic stimulus measures. The DPP submitted formal proposals to Prime Minister Takaichi requesting higher income thresholds be included in the government's new economic policy package, according to NHK reporting on November 12. The party argues that raising these walls would encourage more people to work additional hours without fear of losing financial benefits, potentially addressing Japan's chronic labor shortage while boosting household incomes. For foreign residents, these reforms could significantly impact financial planning and employment decisions. Many expats working part-time or supporting spouses who work part-time have structured their employment around current thresholds to optimize tax benefits. Changes to these limits would alter the calculus for how much income can be earned before triggering additional tax burdens. The current system creates several "walls" at different income levels. Beyond the ¥1.03 million threshold for income tax, there's a ¥1.3 million threshold affecting social insurance contributions and a ¥1.5 million threshold where dependent deductions for spouses begin to phase out. Each wall creates a disincentive to earn beyond that point, as the additional income may be offset by taxes and lost benefits. Economists have long criticized these thresholds for distorting labor market behavior and limiting economic growth. In an era of rising living costs and persistent inflation, the government faces mounting pressure to adjust these decades-old limits to reflect current economic realities. The thresholds haven't kept pace with wage growth or inflation, making them increasingly restrictive. The timing of these discussions is particularly significant as Japan grapples with economic pressures including a weakening yen, rising import costs, and the need to stimulate domestic consumption. Raising income thresholds could put more money in workers' pockets and encourage increased labor force participation, particularly among married women who have historically limited their work hours due to these tax considerations. However, any changes will require careful negotiation between the ruling coalition and opposition parties. The government must balance the desire to stimulate the economy and support workers against concerns about reduced tax revenue and the long-term sustainability of social insurance programs. For expats living in Japan, the coming months will be critical to watch. While no specific figures for revised thresholds have been announced, the political momentum suggests changes are likely. Foreign residents should monitor official announcements and consider consulting with tax professionals about how potential reforms might affect their individual circumstances, particularly if they or their dependents work part-time or have income near current threshold levels.