Japan Joins Fight Against Property Speculation... Weighs "52% Capital Gains Tax on Short-Term Sales"

Regulatory measures discussed ahead of April local elections

Japan's ruling Liberal Democratic Party is reportedly considering imposing a heavier capital gains tax on short-term property sales to curb the sharp rise in apartment prices in major metropolitan areas, including Tokyo. Ahead of the local elections in April 2027, the move appears aimed at curbing real estate speculation, easing the burden on people buying homes for their own use, and winning support from younger voters.

According to The Nikkei on Oct. 22, the LDP's Housing and Land and Urban Policy Research Commission invited the mayor of Chiyoda Ward in Tokyo, university professors and industry representatives to a meeting the previous day to hear their views on the housing market. The Nikkei reported that the commission plans to use the meeting's discussions to draw up measures to curb soaring real estate prices.

One key proposal reportedly under discussion is reviving the special tax system on land transfer gains, whose application has been suspended since 1998. After the meeting on Oct. 21, lawmaker Midori Matsushima told reporters that the party was considering reinstating the system. Under the proposal, a 52% tax rate would apply to certain income earned by individuals from selling land they had owned for five years or less. Corporations would also face an additional tax of 5% to 10% on capital gains, depending on how long they had held the land.

People take photos with their smartphones in Shinjuku, Tokyo, Japan, on the 15th. Tokyo, Japan = EPA-Yonhap News.

Japan introduced the system in 1973 to curb speculative land transactions. However, its application was suspended in 1998, following the collapse of the bubble economy. Currently, income from selling real estate within five years of purchase is classified as "short-term capital gains." The tax rate on short-term capital gains is 40%, twice the rate on "long-term capital gains" from properties held for more than five years. However, some within the LDP argue that the current tax rate alone is not enough to curb speculative transactions.

The debate comes amid a steep rise in home prices, particularly in Tokyo's 23 wards. According to the Real Estate Economic Institute of Japan, the average price of newly built apartments in the 23 wards in fiscal 2025 (April 2025 to March 2026) was 137.84 million yen (1.15752 billion won), up 18.5% from the previous fiscal year. By contrast, full-time employees in Tokyo earned an average annual salary of just 6.78 million yen (56.93 million won) last year, making it increasingly difficult for people buying homes for their own use to afford one on their employment income alone.

The Nikkei said the LDP's move to discuss real estate regulations is aimed at winning voter support ahead of the unified local elections in April 2027. Ward council elections are scheduled in 22 of Tokyo's 23 wards, prompting the party to seek support from younger and middle-aged voters, as well as households raising children, who are at the stage of buying homes.

Opposition parties are also advancing policies to ease the burden of housing costs. On Oct. 20, the Democratic Party for the People included measures to reduce rents for public housing in its inflation relief package. Komeito also cited Tokyo's use of a public-private fund to provide affordable rental housing and signaled that it would pursue additional housing support measures.

However, some have warned that artificially curbing real estate prices could put pressure on financial markets. In particular, real estate lending by Japan's regional banks is concentrated in central Tokyo, raising concerns that a sharp, regulation-driven decline in home prices could weaken the banks' financial soundness. A senior official from the LDP's Tax System Research Commission also told The Nikkei, "We need to carefully assess the impact on regional banks." According to Japan's Financial Services Agency, as of March 2025, about one-quarter of all real estate industry loans by regional banks nationwide were concentrated in five central Tokyo wards.

Experts have stressed that efforts to expand housing supply must accompany regulations. Osamu Tanaka, chief economist at the Dai-ichi Life Research Institute, told The Nikkei, "The fundamental cause of rising home prices is a shortage of supply." He added, "Unless measures to curb speculative transactions are implemented alongside policies to expand supply, the effect of lowering prices will not last long."

This content was produced with the assistance of AI translation services.