Why Your Japan Salary Drops in Year Two: Resident Tax

Your company did not cut your pay. Your role did not change. But around June, your bank deposit suddenly got smaller.

If you work in Japan, this is one of the most common “what just happened?” moments. In most cases, the answer is 住民税 (juminzei), usually translated as resident tax.

The trap is not just the tax itself. It is the timing. In many cases, 住民税 (juminzei) does not show up on your first Japanese payslips, then starts being withheld later based on the income you earned the year before.

That is why year two often feels like a salary cut even when nothing changed at work.

The Core Rule: Resident Tax Looks Backward, Not Forward

住民税 (juminzei) is a local tax based mainly on your previous calendar year’s income.

That means:

the income you earn from January to December
is used to calculate the resident tax for the following year

JETRO’s overview of Japan’s taxes states that inhabitant tax is generally charged on the income earned in the preceding year.

This is the reason the second-year shock exists.

If you arrive in Japan and start working for the first time, your earliest payslips often do not yet have a resident-tax deduction based on prior Japanese salary. Then, once the next cycle begins, the tax starts showing up and your 手取り (tedori) drops.

The January 1 Rule Is the Part Most People Miss

Resident tax is tied to where you are registered as living on January 1.

Official city guidance across major cities says the same thing in slightly different words:

Tokyo: the Tokyo Metropolitan Tax Bureau says 個人住民税 (kojin juminzei) is based on the previous year’s income and applies to people with an address in Tokyo on January 1, and Shinjuku’s English page tells foreign residents the same thing in simpler language Sources, link
Across other major cities too: the same January 1 and previous-year-income rule appears in Yokohama, Nagoya, Osaka, Hiroshima, Fukuoka, and Kumamoto Sources, link, link, link, link, link

So the practical rule is:

if you were living in a city on January 1
and had enough taxable income for the previous year
that city will usually be part of the resident-tax story for that year

This is also why moving in February does not usually move that year’s resident-tax liability to the new city.

Why It Usually Starts Showing Up Around June

For normal employees, resident tax is often paid through 給与からの特別徴収, meaning the employer withholds it from salary.

The Tokyo Metropolitan Tax Bureau’s special-collection guidance says salary earners are generally withheld from June to the following May.

Fukuoka City states this very clearly on its resident-tax payment page: for salary earners, the company deducts the tax from salary from June to the following May.

Shibuya City says the same thing in its English guidance: company employees typically have it deducted from salary from June until May of the following year.

Yokohama also says on its English tax page that tax notifications are sent at the beginning of June.

Kumamoto City is consistent too: its resident-tax payment page says salary earners are usually withheld through 給与からの特別徴収 (kyuyo kara no tokubetsu choshu) from June to the following May, with the company’s notice arriving around May.

Nagoya and Hiroshima follow the same employee pattern as well. Nagoya’s FAQ says salary earners are usually withheld from June to the following May, and Hiroshima’s resident-tax FAQ says the annual amount is divided into 12 payments from June to the following May. Sources, link

So if your take-home pay changes sharply in June, that timing is not random.

It is the normal resident-tax cycle starting.

A Concrete Example: Why Year Two Feels Worse

Let’s use one simple example.

Imagine a foreign engineer:

single
under 40
no dependents
living in Japan for the first full working year
gross salary around ¥5,400,000 a year

In year one, their monthly payslip may already show:

健康保険 (kenko hoken)
厚生年金 (kosei nenkin)
雇用保険 (koyo hoken)
所得税 (shotokuzei)

But it may still show little or no 住民税 (juminzei) at first.

Then the next cycle begins.

Using a very rough budgeting lens, many workers in this income range may suddenly see something like:

住民税 (juminzei) withheld at around ¥15,000 to ¥25,000 per month

That is enough to make a normal monthly bank deposit feel meaningfully worse, even though:

your contract did not change
your base salary did not change
your company did not “reduce pay”

Is Resident Tax Just a Flat 10%?

This is where articles often get sloppy.

The short version is:

the income-based part is often described as roughly 10%
but the exact split and extra components can vary

JETRO describes the standard income-based structure as:

6% municipal
4% prefectural

plus a flat per-capita element, according to JETRO’s tax overview.

But designated cities have an important wrinkle.

For example:

Fukuoka uses 8% city / 2% prefecture for the income-based portion on its rate page
Osaka City notes the same designated-city shift from the older 6/4 framing to 8/2 on its tax guide
Kanagawa Prefecture also has local surtax nuances, and for designated cities the prefectural portion is shown as 2.025% rather than a clean 2% because of the prefecture’s extra tax layer on the prefecture’s tax page
Kumamoto, which is not a designated city in the same way as Osaka or Fukuoka, still uses the more familiar 6% city / 4% prefecture framing in its resident-tax pages
Hiroshima, as a designated city, publishes the familiar 8% city / 2% prefecture income-based split on its tax page

So the safest way to explain it is:

roughly 10% income-based resident tax in many ordinary cases
but the exact math is not identical everywhere

That is why I would use resident tax as a budgeting concept first, not a “one rate fits all” assumption.

What You Will Usually See on the Payslip

On a salary employee’s payslip, resident tax may appear as:

住民税
市民税・県民税
sometimes a company-specific label that still points to the same local-tax withholding idea

If you want the full payslip walkthrough, our article on how to read your Japanese payslip as a foreigner goes line by line through the whole payroll structure.

For this article, the key thing is simple:

If a new line starts appearing around June and your 差引支給額 (sashihiki shikyu gaku) drops, resident tax is the first thing to check.

Why Your First Year Feels Fine and Your Second Year Feels Tighter

This is the emotional part of the problem.

In year one, a lot of people budget around what they actually see landing in their bank account. That feels reasonable.

Then year two arrives, and suddenly:

rent is the same
groceries are the same
commuting is the same
but take-home pay is smaller

What happened is not “bad luck.” It is delayed taxation.

This is why a lot of foreign workers describe resident tax as a hidden tax. It was always part of the system, but the delay makes it feel like a new penalty.

What to Do in Year One So Year Two Does Not Hurt as Much

The simplest strategy is to budget for resident tax before it starts showing up.

What I would tell a new engineer is:

assume year-two take-home pay will be lower than year-one take-home pay
build a buffer in year one instead of treating the whole bank deposit as permanently spendable
if you want a rough planning habit, set aside a resident-tax reserve every month

You do not need a perfect model on day one. You just need to avoid mentally locking in your first-year take-home pay as your long-term normal.

What Happens If You Leave Japan?

This is the other place people get caught out.

Fukuoka City’s English guidance is very clear:

if you leave Japan before receiving the tax notice, you must appoint a tax administrator
if you leave after receiving the notice, you must pay outstanding tax or appoint a tax administrator

That is laid out in Fukuoka City’s English guidance.

Osaka City’s foreign-resident guide says the same thing in substance: if you cannot settle resident tax before leaving, appoint a resident in Japan as a tax agent and notify the municipality.

Kumamoto City is explicit as well: its guidance page says that if you leave Japan after January 1 and still fall into that year’s resident-tax cycle, you generally need to either pay before departure or appoint a 納税管理人 (nozei kanrinin) to receive notices and handle payment for you.

Nagoya and Hiroshima say the same in even plainer terms. Nagoya’s English page for people moving abroad says you should either pay before departure or appoint a tax agent in Nagoya, and Hiroshima’s English page for international residents says that even if you leave Japan mid-year, you are still legally responsible and should appoint a 納税管理人 (nozei kanrinin). Sources, link

So if you are planning to leave Japan, do not assume departing the country makes the problem disappear.

The safer question is:

what do I still owe?
has the notice already been issued?
do I need a 納税管理人 (nozei kanrinin) to handle it?

What Happens If You Change Jobs or Quit Mid-Cycle?

This is the missing edge case that catches a lot of people.

Resident tax is often being withheld through 特別徴収 (tokubetsu choshu) from your salary. But if you resign, that salary-withholding flow can break in the middle of the year.

Hiroshima City’s resident-tax guidance explains the basic pattern:

resident tax for employees is normally split from June to the following May
if you leave the company, the unpaid balance may stop being withheld from salary
the remaining tax may then move to 普通徴収 (futsu choshu), meaning direct payment by notice
or, depending on the situation, it may be collected from the last salary or retirement payment

Sources, link

Kumamoto City’s special-collection page says the same thing in practice: if salary withholding becomes impossible because of resignation, the remaining amount may switch away from the normal salary-deduction route.

So if you change jobs, there are three questions to ask immediately:

will the old employer collect the balance from the last paycheck?
will the new employer continue 特別徴収 (tokubetsu choshu)?
or will you receive direct payment slips under 普通徴収 (futsu choshu)?

If you do not check this, it is easy to think the problem is gone, then get hit later by payment slips you did not budget for.

Common Mistakes

These are the mistakes I see most often:

assuming the first year’s take-home pay is the permanent normal
thinking the June drop means payroll made a mistake
treating resident tax as exactly the same in every city
forgetting the January 1 rule when moving or leaving
leaving Japan without sorting out payment or a tax administrator

None of these are unusual mistakes. The system is just built in a way that hides the timing until it suddenly matters.

The Short Version

If your salary in Japan suddenly feels lower in year two, check these five things first:

Did 住民税 (juminzei) start appearing on your payslip around June?
Were you living in that municipality on January 1?
Is the tax based on the income you earned in the previous calendar year?
Is your company withholding it through salary from June to the following May?
If you are moving or leaving Japan, do you need to settle it or appoint a 納税管理人 (nozei kanrinin)?

Once you understand those five points, the “salary drop” stops feeling mysterious.

It is still annoying. But at least it makes sense.

Key sources: JETRO on Japan’s tax system and inhabitant tax; Tokyo Metropolitan Tax Bureau on individual resident tax and special collection from June to the following May; Shinjuku City’s English page on resident tax; Shibuya City on resident tax and salary withholding timing; Fukuoka City on tax information in English, salary withholding from June to the following May, and income-based rate split; Yokohama City on municipal and prefectural resident tax; Osaka City on its foreign residents tax guide and living procedures tax summary; Kanagawa Prefecture on individual prefectural inhabitant tax and special collection; Kumamoto City on who is taxable and the previous-year basis, salary withholding from June to the following May, and tax administrator rules when leaving Japan; Nagoya on who is taxable, the following-year tax rule, salary withholding from June to the following May, example rate calculations, and leaving-Japan payment / tax-agent rules; and Hiroshima on who is taxable, English guidance for international residents, salary withholding from June to the following May, and its income-based split.