How to Read Your Japanese Payslip — Understanding Tax and Social Insurance Deductions

Your first Japanese payslip can look like a long list of unfamiliar Japanese terms and numbers. You agreed to a monthly salary, but the amount deposited into your bank account is noticeably smaller. Where did the rest go?

The answer is straightforward once you understand the structure. Japanese payslips follow a consistent format: one section showing what you earned, and another showing what was deducted before you received payment. Every deduction is required by law or by your employment contract — nothing is arbitrary.

This article explains each item in plain English, so you can verify your payslip is correct and understand exactly what you are paying into.

The Two Sections: gross pay (Earnings) and deductions (Deductions)

Every Japanese payslip is divided into two main columns or sections:

Your actual bank deposit — called take-home pay (tezdori-gaku) or netgross payamount (sashihiki shikyu-gaku) — is calculated as:

Understanding the gross pay (Earnings) Section

base salary (kihon-kyu) — Base Salary

This is the core amount stated in your employment contract. It is the starting point for all calculations. Every other payment is added on top of base salary.

allowance (teate) — Allowances

Allowances are supplementary payments provided on top of your base salary. Common allowances include:

• commute allowance (tsukin teate) — Commuting allowance. Covers your train, bus, or other commuting costs. Up to 150,000 yen per month is tax-exempt for public transit users.
• housing allowance (jutaku teate) — Housing allowance. A fixed subsidy toward rent, provided by some employers.
• position allowance (yakushoku teate) — Position/managerial allowance. Paid to employees with supervisory responsibilities.
• overtime allowance (jikangai teate) — Overtime allowance. Required by law at a minimum premium of 25% above your regular hourly rate.

The sum of base salary and all allowance forms your total gross pay, which is the gross pay figure that deductions are calculated from.

Understanding the deductions (Deductions) Section

This is where most of the confusion lies. There are typically five types of deductions on a Japanese payslip. The first three are social insurance premiums; the last two are taxes.

1. health insurance (Kenko Hoken) — Health Insurance

Japan's employer-based health insurance gives you access to medical care at a 30% self-pay rate (you pay 30% of medical bills; insurance covers 70%). The premium is calculated as a percentage of your monthly salary.

The total premium rate is determined by which health insurance association administers your coverage. For workers covered by Kyokai Kenpo, the rate varies by prefecture — as of April 2025, the Tokyo rate is approximately 9.91% of standard monthly remuneration. The cost is split 50/50 between employer and employee, so the employee's share is approximately 5% (the exact figure depends on your prefecture and insurer).

Workers aged 40 and over also pay nursing care insurance premiums — approximately 0.8% of standard monthly remuneration as the employee's share (rate as of 2025).

For authoritative information on social insurance, see the Ministry of Health, Labour and Welfare social insurance page.

2. Employees Pension Insurance (Kosei Nenkin Hoken) — Welfare Pension Insurance

This is Japan's employee pension system. Contributions go toward your retirement pension. The total premium rate is 18.3% of your standard monthly remuneration, split equally between employer and employee — so the employee pays approximately 9.15%.

Even as a foreign worker, you contribute to this pension. If you leave Japan, you may be eligible for a lump-sum withdrawal payment of contributions made during your time in Japan, subject to certain conditions.

3. employment insurance (Koyo Hoken) — Employment Insurance

Employment insurance (often called unemployment insurance) provides income support if you lose your job. As of April 2025, the employee contribution rate for general workers is 0.55% of total wages (reduced from 0.6% that applied through March 2025). The employer contributes a higher share. This deduction is relatively small compared to health insurance and pension.

4. income tax (Shotoku-zei) — Income Tax (Withholding)

Income tax is withheld from your monthly salary by your employer based on the withholding tax table issued by the National Tax Agency. The withheld amount is an estimate; the final amount is reconciled at year-end through the year-end tax adjustment process, which your employer typically handles on your behalf.

For lower monthly incomes (around 200,000–250,000 yen), the withheld income tax amount tends to be relatively small. The exact amount depends on your salary level, number of dependents claimed, and applicable deductions.

5. residence tax (Jumin-zei) — Resident Tax

Resident tax (also called local inhabitant tax or juminzei) is a local tax paid to the city/ward and prefecture where you live. It is typically approximately 10% of your prior year's taxable income (6% city/ward + 4% prefecture), plus a small per-capita levy.

Crucially, resident tax is based on income from the previous calendar year. If you arrived in Japan during the current year and had no income in Japan during the prior year, you will have zero resident tax deducted until June of your second year. Once it kicks in, it is divided into 12 monthly installments deducted from your salary each month from June through May.

Sample Payslip Calculation

The following is a simplified, illustrative example only. All figures are approximate and for educational purposes. Actual amounts vary depending on prefecture, health insurance association, age, prior-year income, and other individual factors.

All figures above are approximate and for illustration purposes only. Health insurance rates vary by prefecture and insurer. Resident tax is zero in the first year in Japan. Actual deductions will differ based on individual circumstances.

Why Is Resident Tax Zero in Your First Year?

This surprises many new workers in Japan. You receive your payslip and notice that the residence tax (resident tax) line shows 0 yen, while your Japanese colleagues have a substantial amount deducted. This is not a mistake.

Resident tax operates on a one-year lag. The amount deducted from June 2026 to May 2027 is based on income earned in calendar year 2025. If you arrived in Japan in, say, April 2025 and had no taxable income in Japan during 2024, your resident tax base for the June 2025–May 2026 cycle is zero.

Starting from June of your second year, resident tax based on your first year's earnings will begin appearing on your payslip. For a worker earning 200,000–250,000 yen per month, this deduction can be 5,000–15,000 yen per month. The sudden increase is a common source of confusion and financial strain — planning for it in advance makes a significant difference.

What If You Think a Deduction Is Wrong?

Payroll errors do happen. If a figure on your payslip looks incorrect, here is how to approach it:

As a foreign worker in Japan, you have the same legal protections as any other worker. For a broader overview of your rights, see our article on rights of foreign workers in Japan.

Frequently Asked Questions

Summary

Reading your payslip carefully is not just about curiosity — it is a practical way to protect yourself. If deductions are calculated on the wrong base amount, or if allowances are being incorrectly treated as taxable income, the financial impact compounds over time. Taking a few minutes each month to check your payslip is worthwhile.

Information accurate as of April 2026. Tax and social insurance rates are subject to change by law or regulation. Health insurance rates vary by prefecture and health insurance association. This article is for general informational purposes only and does not constitute legal or tax advice. For your individual situation, consult a qualified professional. For official information on social insurance, visit the Ministry of Health, Labour and Welfare.