Starting a career in Japan is an exciting milestone, but the first look at a Japanese payslip can be a source of confusion. Understanding the difference between your Gross Salary (額面 – Gakumen) and your Net Pay (手取り – Tedori) is crucial for effective budgeting and long-term financial planning.
In this guide, we break down the deductions and highlight ways to optimize your finances.
1. The 75-80% Rule for Net Pay
In Japan, your take-home pay is typically 75% to 80% of your gross salary. While your offer letter might show a high annual figure, it is important to calculate your monthly “disposable income” to plan your rent and lifestyle accurately.
Estimated Take-Home Pay Simulation (Monthly)
Figures are approximate and may vary slightly based on age, location (prefecture), and number of dependents.
| Gross Monthly Salary | Estimated Deductions | Estimated Net Pay (Take-home) |
% of Gross |
| ¥400,000 | ~ ¥85,000 | ¥315,000 | 78.8% |
| ¥600,000 | ~ ¥140,000 | ¥460,000 | 76.7% |
| ¥800,000 | ~ ¥205,000 | ¥595,000 | 74.4% |
| ¥1,000,000 | ~ ¥280,000 | ¥720,000 | 72.0% |
Note: As your income increases, the percentage of deductions also increases due to Japan’s progressive tax system. Professionals earning over ¥10M annually may see their take-home pay dip closer to 70-72% once Resident Tax kicks in fully.
Key Takeaway for Budgeting
When moving to Japan or changing jobs, we recommend using the 0.75 multiplier as a safe baseline for your budget. If you earn ¥600,000, budgeting your life around ¥450,000 ensures you won’t be caught off guard by tax season.
2. The Four Pillars of Deductions: What are you paying for?
Your contributions aren’t just “lost” money; they fund a robust social safety net.
Here is a deeper look at what is being deducted:
① Health Insurance (健康保険 – Kenko Hoken)
Japan’s public health insurance is world-class. It covers 70% of your medical expenses, meaning you only pay a 30% co-pay at clinics and hospitals.
- High-Cost Medical Expense Benefit: If you face a major surgery or long-term hospitalization, the system caps your monthly out-of-pocket expenses based on your income, preventing medical bankruptcy.
② Employees’ Pension (厚生年金 – Kosei Nenkin)
This is a mandatory contribution for your retirement.
While it may feel like a distant concern, it offers two immediate benefits for expats:
- Lump-sum Withdrawal Payment: If you decide to leave Japan after contributing for at least 6 months (and up to 5 years of contributions), you can claim a significant refund of your pension premiums.
- Disability/Survivors’ Pension: If you are injured or pass away while working in Japan, this system provides financial support to you or your family.
③ Employment Insurance (雇用保険 – Koyo Hoken)
This is your safety net for career transitions.
- Unemployment Benefits: If you are laid off or your contract ends, you may be eligible for monthly payments while you search for a new job.
- Childcare Leave Benefits: This fund also pays for a significant portion of your salary (up to 67%) if you take leave to care for a newborn.
④ Income Tax (所得税 – Shotoku Zei)
This is a progressive national tax deducted monthly based on your current year’s earnings. Your employer performs a “Year-End Tax Adjustment” (年末調整 – Nenmatsu Chosei) in December to reconcile any overpayments or underpayments made throughout the year.
3. The “Second-Year Trap” of Resident Tax
As a reminder: Resident Tax (住民税 – Juminzei) is calculated based on the previous year’s income. Most newcomers pay zero in their first year, but face a significant bill starting in June of their second year. Budget for an additional 10% deduction from your gross salary starting in year two.
4. Maximizing Your Take-Home Pay: Smart Tax Strategies
Living in Japan as a professional allows you to utilize several legal “tax hacks” to reduce your taxable income.
■ Hometown Tax Donation (ふるさと納税 – Furusato Nozei)
This is arguably the most popular tax-saving scheme in Japan.
- How it works: You “donate” a portion of your future resident tax to a municipality of your choice.
- The Benefit: In return, the municipality sends you a “thank you” gift (such as high-quality meat, rice, electronics, or travel vouchers).
- The Result: All donation amounts above 2,000 JPY are deducted from your taxes the following year. Essentially, you are pre-paying taxes you owe anyway and getting premium products for free.
■ Dependent Deductions (扶養控除 – Fuyo Kojo)
If you financially support family members—including those living outside of Japan—you may be eligible for a tax deduction.
- Requirements: You must provide proof of relationship and official bank records showing regular remittances to each dependent.
- Note: Recent law changes have made the criteria stricter (e.g., dependents aged 30–70 living abroad must generally receive at least 380,000 JPY/year to qualify).
■ Private Insurance & iDeCo
- Life Insurance Deduction: If you take out a private life or medical insurance policy in Japan, a portion of the premiums can be deducted from your taxable income.
- iDeCo (Individual Defined Contribution Pension): For those planning a long-term stay, contributing to an iDeCo account allows you to invest for retirement with 100% tax-deductible contributions. However, note that withdrawals are generally not permitted until age 60.
5. Conclusion
Understanding the Japanese system allows you to move from “feeling taxed” to “being in control.”
By knowing the 75-80% rule and utilizing systems like Furusato Nozei, you can manage your finances with confidence and focus on your professional growth in Japan.
📩 For more articles
・Subscribe to the Newsletter
🌟 Interested in working in Japan’s tech industry?
・Contact us from the contact form
・Explore job opportunities on our Job Board for Foreign Engineers
・Follow us on Linkedin to stay updated!
