Foreign residents in Japan are facing significant changes to the country's tax and financial landscape as 2025 draws to a close, with reforms that will affect everything from fuel costs to home loans and potential tax relief mechanisms. On December 31, 2025, Japan abolished the gasoline tax provisional rate that had been in place for approximately 50 years, according to NHK. This temporary tax surcharge, originally introduced as a short-term measure, had become a permanent fixture of Japan's fuel taxation system. The elimination of this provisional rate will reduce the tax burden on gasoline consumers, including the many foreign residents who drive in Japan. A similar provisional rate on diesel fuel tax (keiyū hikitorizei) is scheduled for abolition in April 2026, promising further relief for drivers and businesses that rely on diesel vehicles. While these cuts will lower costs at the pump, NHK reports that securing alternative revenue sources remains a significant challenge for the government. The provisional rates have long contributed substantial funds to national coffers, and their elimination creates a fiscal gap that policymakers must address. Simultaneously, the Japanese government and ruling Liberal Democratic Party are moving forward with plans to establish a national council to examine the introduction of a "refundable tax credit" system (kyūfu-tsuki zeigaku kōjo). According to NHK, this council is expected to include Prime Minister Takaichi and policy leaders from various political parties that support the measure. Detailed coordination regarding the council's structure and agenda is set to begin in earnest after the New Year. The refundable tax credit system represents a potentially significant shift in Japan's approach to tax policy and social welfare. Unlike traditional tax deductions that only benefit those with sufficient tax liability, refundable tax credits can provide direct payments to lower-income individuals whose tax credits exceed their tax obligations. For foreign residents, particularly those in lower income brackets or facing financial hardship, this system could offer more substantial support than current mechanisms. The timing of these tax reforms coincides with changes in Japan's financial sector that will affect many residents' household budgets. Major banks announced increases to fixed-rate housing loans starting January 2026, responding to rising long-term interest rates, NHK reported. While the popular variable-rate mortgages remain unchanged for now, banks have indicated these rates could rise in the future. For foreign residents with existing fixed-rate mortgages, these changes won't affect current loan terms. However, those considering purchasing property or refinancing should carefully evaluate their options before rates climb further. The variable-rate products, while currently stable, carry inherent risk if the Bank of Japan continues adjusting its monetary policy. These developments reflect broader economic shifts as Japan moves away from decades of ultra-low interest rates and reconsiders its tax structure. The gasoline tax reduction offers immediate relief but raises questions about infrastructure funding traditionally supported by fuel taxes. The proposed refundable tax credit system could provide more equitable support across income levels, though implementation details remain under discussion. Foreign residents should monitor these changes closely, as they will affect household budgets and financial planning. The gasoline tax reduction takes effect immediately, while the refundable tax credit system remains in the planning stages. Housing loan applicants should consult with banks about rate locks and timing options, and all residents should stay informed about the national council's deliberations on tax reform. As Japan navigates these significant fiscal changes, expats should consider consulting with tax professionals familiar with both Japanese tax law and international tax obligations to understand how these reforms may affect their specific situations.