Why was a post-disaster reconstruction tax successfully introduced in Japan, a country known for strong resistance to taxation, following the Great East Japan Earthquake?

Takashi Miyaji, internal medicine

Clinical Education and Training Center, Akita University Hospital

【Key points 】

•Key concepts emphasized by the Reconstruction Design Council included “solidarity” and the “responsibility of the working generation.”

•Income tax, which allows for contributions based on individuals’ ability to pay, served as the main source of funding.

•Policies should be aligned with public values and provide a clear direction for society as a whole.

While taxation is often regarded as a necessary evil, why was a reconstruction tax successfully implemented in the midst of national uncertainty following the Great East Japan Earthquake? To address this question, this study was conducted and subsequently published in the International Journal of Disaster Risk Reduction. http://doi.org/10.1016/j.ijdrr.2025.105228 

This study adopts a case study approach, drawing on facts collected from past meeting records and official reports, analyzing their relationship with public opinion surveys, and incorporating insights from an interview with Shinichi Sato, former Vice Minister of Finance for International Affairs, who supported policy decision-making at the administrative level at the time. This paper introduces this study and aims to examine what policymakers should consider when confronting a national crisis.

In general disaster situations, responses are primarily led by local governments under the Disaster Countermeasures Basic Act. Financial resources are often secured through measures such as budget reallocation within the fiscal year or the sale of government-owned assets. However, the Great East Japan Earthquake was an unprecedented and complex disaster that affected a large number of municipalities. At the time, the cost of reconstruction was estimated to be between 16 and 25 trillion yen. Meanwhile, Japan’s fiscal deficit had already exceeded 200% of GDP, and increases in social security spending due to an aging population were unavoidable. Although the issuance of government bonds was inevitable as a short-term funding measure, relying on conventional deficit-financing bonds would impose an excessive burden on future generations, making such an option difficult to justify.

Government bonds issued for the Great East Japan Earthquake were treated differently from ordinary bonds. Under the Act on Securing Financial Resources for Reconstruction, they were required to be redeemed by 2037 (25 years after the disaster) through increases in core taxes. This distinguishes them clearly from standard government bonds, which are typically redeemed over 60 years under the Public Finance Act. The 25-year period roughly corresponds to one generation, meaning that the working generation would bear responsibility for repayment. Cases in which reconstruction costs on the scale of 10 trillion yen are financed through tax increases are extremely rare worldwide. Although Japan’s consumption tax rate remains relatively low at 10% compared to Western countries, it is also known for strong public resistance to tax increases, with political turnover often occurring during tax debates. Against this backdrop, the implementation of tax increases in response to an unprecedented disaster is particularly noteworthy.

A key feature of the process leading to the introduction of reconstruction taxes was the establishment of the Reconstruction Design Council shortly after the disaster, composed of experts from diverse fields. This was followed by the enactment of the Basic Act on Reconstruction from the Great East Japan Earthquake in the Diet. The Council was launched under the Cabinet on April 11th, one month after the disaster, and on May 10th it announced the “Seven Principles for Reconstruction.” Principle 7 explicitly stated that “all of us living today must regard this disaster as our own, and promote reconstruction through national solidarity and shared responsibility,” thereby presenting a key idea that would later underpin the reconstruction tax. Furthermore, the report “Towards Reconstruction: Hope Beyond the Disaster,” released on June 25th, emphasized the responsibility of the working generation.

Deliberations in the Diet progressed alongside these developments, and the Basic Act on Reconstruction was enacted on June 24th. Article 5 clearly stated that “based on the spirit of mutual support and solidarity, efforts shall be made to assist disaster victims and support one another,” effectively placing a legal obligation on citizens. In addition, the “Basic Guidelines for Reconstruction from the Great East Japan Earthquake,” approved by the Cabinet on July 29th, clarified the policy of using core taxes as the main source of reconstruction funding. Following this decision, detailed discussions on specific tax measures began in the Tax Commission on August 4th, and the Act on Securing Financial Resources for Reconstruction was submitted to the Diet on October 28th. Although some revisions were made to specific tax items, the bill passed with overwhelming support in both the House of Representatives and the House of Councillors and was promulgated on December 2nd.

The structure of the reconstruction tax was as follows: corporate tax was increased by 10% for the period from 2012 to 2014; income tax was increased by 2.1% for 25 years starting in fiscal year 2013; and resident tax was raised by 1,000 yen annually for 10 years beginning in 2014. Although the special reconstruction corporate tax was terminated one year earlier than planned in 2013 following a change in government in 2012, by 2021 a total of 2.3 trillion yen had been raised from corporate tax, 2.3 trillion yen from income tax, and 0.8 trillion yen from resident tax. Income tax collection continues, and it is expected that a total of 12.7 trillion yen will be secured over the 25-year period following the disaster. The total reconstruction budget is estimated at approximately 32 trillion yen, of which around 40% is to be financed through taxation, with the remainder covered by measures such as the sale of government-owned assets and budget reallocation.

Two important points emerge from an analysis of both the process and structure of the reconstruction tax. First, strong terms such as “solidarity” and the “responsibility of the working generation” were repeatedly emphasized in official documents and Diet debates, clearly presenting the direction of reconstruction policy. This reflects the idea of “shared hardship” discussed by Joseph Schumpeter in his work The Crisis of the Tax State, suggesting that the government was able to frame the crisis it faced as a public issue shared by all citizens.

According to Schumpeter, modern states emerge from “shared hardship.” In other words, trust in the state arises when the difficulties faced by the nation are defined as public concerns and successfully shared with its citizens. Conversely, even policies that impose burdens on the public are more likely to be accepted if they are clearly understood as necessary to overcome such shared hardship.

In particular, at a time when the risk of major earthquakes—something many Japanese people are implicitly aware of—became a reality, the use of terms such as “solidarity” likely fostered a sense of shared responsibility even among those outside the affected areas. In fact, public opinion surveys at the time showed that over 80% of respondents made donations to disaster-hit regions, and more than 50% expressed support for the reconstruction tax.

The second key point is that, among core taxes, income tax became the primary source of revenue. The system was designed to secure additional tax revenue while maintaining the existing progressive structure of income taxation, thereby enabling contributions based on individuals’ ability to pay. This also meant that the burden on disaster victims, whose incomes had declined, was relatively limited. In contrast, it is likely that a regressive tax such as the consumption tax would not have been widely accepted at that time. In Japan, a survey conducted by NHK found that 69% of respondents felt that inequality in society was unacceptably large, while 48% perceived themselves as belonging to a lower social position. Under such conditions, it can be argued that there was a need for a tax system based on income levels that would avoid generating social resentment.

The early termination of the special reconstruction corporate tax and the public response to it further highlighted the importance of fairness in fiscal policy during post-disaster reconstruction. Following the change in government in December 2012, Shinzo Abe assumed office as Prime Minister. In general, changes in government often lead to shifts in policy priorities, resulting in major policy changes, and this case was no exception.

The Abe administration placed overcoming deflation at the top of its policy agenda and positioned so-called “Abenomics” at the core of its economic strategy. As part of its growth strategy, it adopted a policy of reducing the corporate tax burden to enhance corporate competitiveness and prevent capital outflow. As an initial step, the special reconstruction corporate tax was abolished one year ahead of schedule. In addition, the basic corporate tax rate was significantly reduced. As Abe himself noted in his memoirs, he took the position that reconstruction should be financed through long-term government bonds and was fundamentally opposed to relying on tax increases.

However, this stance on reconstruction was not widely accepted by the public. According to a public opinion survey conducted by Kyodo News on October 1st–2nd, 2013, 65% of respondents opposed the early abolition of the special reconstruction corporate tax, significantly exceeding the 24% who supported it. Opposition was particularly strong in the Tohoku region, reaching 74%.

These results suggest that the abolition of the tax was perceived as preferential treatment for corporations, thereby generating public resentment toward them. At the same time, and somewhat paradoxically, they also reflect a broader public sentiment that both individuals and corporations should cooperate in addressing post-disaster reconstruction. In this sense, the findings indirectly demonstrate a strong consensus that the burden of reconstruction should be shared fairly among the current generation in accordance with the ability to pay.

In recent years, crises affecting nation-states have become increasingly frequent, including natural disasters associated with climate change, pandemics such as COVID-19, and geopolitical conflicts such as the Russia–Ukraine war and the Israel–Palestine issue. When such latent fears become reality for a nation and its people, the question arises as to how the state should respond. The lessons derived from the Great East Japan Earthquake and subsequent reconstruction policies—particularly the approach to securing financial resources—suggest that responses extending beyond conventional fiscal policy are required. Through measures such as the enactment of basic legislation, the government should define such threats as “shared hardship” and, by implementing policies aligned with public values, provide a clear direction for society as a whole.

Finally, this paper presents a concrete analytical framework, which is also discussed in detail in the study.

1. Defining “shared hardship”

(i) The government must determine whether the issue it faces can be addressed through incremental measures or whether it constitutes a “shared hardship” that should be confronted collectively as a matter of national consensus. Naturally, whether a given issue qualifies as a “shared hardship” depends on a comprehensive consideration of factors such as the country’s historical background, geography, economic conditions, and public sentiment.

(ii) Based on this determination, the government should promptly convene a group of experts from diverse backgrounds and establish a specialized body composed of these members. Through deliberation, this body should pool collective knowledge to identify the essence of the problem, share it with the public, and propose a response plan that is both convincing and broadly acceptable, which should then be communicated to society.

(iii) In order to formalize the above “national response plan for addressing shared hardship” as a unified public commitment, the government should enact a basic national law for addressing such hardship and implement concrete policies based on it.

2. Clarifying the responsibility of the working generation

(i) Since “shared hardship” is likely to have a significant impact on the nation’s future, the financial resources required for addressing it are expected to be substantial. Therefore, the design of funding measures should ensure that the burden is not passed on to future generations, but instead addressed collectively and responsibly by the current generation.

(ii) This principle should be incorporated into the “basic national law,” thereby clearly defining the fiscal responsibility of the working generation in legal terms.

3. Designing a system that avoids tax-related resentment

(i) The tax burden required to address “shared hardship,” depending on its design, may generate significant divisions in the form of resentment among different income groups.

(ii) Such divisions could become a major obstacle to collective action in confronting shared hardship. Therefore, in designing the tax system, careful consideration should be given to relationships among citizens, as well as between the state and its people, including cultural background, values, and public opinion, in order to avoid generating resentment.

The motivation for this research stemmed from an encounter with Shinichi Sato, former Administrative Vice Minister of Finance, at a study session hosted by the Health Policy Institute of Japan. For me, having previously held only a vague understanding of national fiscal policy, his insights into Japanese attitudes toward taxation, views on the state, and their historical foundations were striking.

For example, he pointed out that tax rates in Japan had been relatively low since the So, Yo, and Cho tax system of the Nara period, and that trust in the state declined significantly in the aftermath of World War II. Inspired by these perspectives, I collaborated with researchers at the institute to conduct a study demonstrating the importance of public trust in the state in the context of vaccine policy. This research was subsequently published in The Lancet. https://www.thelancet.com/action/showPdf?pii=S0140-6736%2819%2932686-8

Particularly during the COVID-19 pandemic, numerous studies emphasized that public trust in the state is a critical factor in the effectiveness of healthcare policy more broadly. However, relatively little attention has been given to a more comprehensive and overarching discussion of what policymakers should prioritize when a state faces a crisis. Against this backdrop, under the guidance of Akihiko Ozaki of the Health Policy Institute of Japan, this study was initiated to identify key factors that should be considered when a nation confronts a crisis, using the reconstruction policies following the Great East Japan Earthquake—formulated during Shinichi Sato’s tenure—as a case study.

Five years have passed since the initiation of this research, and the fact that it has now taken shape as a formal publication is entirely due to the support of my co-authors and all those who provided valuable guidance along the way. I would like to express my sincere gratitude to Dr. Akihiko Ozaki for his patient and thoughtful mentorship throughout the research process, even during periods when progress was slow, and to Shinichi Sato for generously sharing his invaluable insights. I would also like to thank Yudai Kaneda for his contribution to the initial English translation of this manuscript, Masaharu Tsubokura for his advice on the positioning of this study within the field of social medicine, and Mihajlo Jakovljevic for enhancing the value of this work from an international perspective.

I would also like to express my deep gratitude to Kazumasa Oguro for his valuable advice on the significance of the reconstruction tax from the perspective of tax policy research, and to Yoshitaka Nishikawa for his guidance on case study methodology.

(This article is a reprint of “Why Reconstruction Tax Increases Were Implemented in Japan Despite Strong Tax Resistance Following the Great East Japan Earthquake,” http://medg.jp/mt/p=12941 published in MERIC by the Japan Society for Medical Governance, Vol. 25041, March 6th, 2025.)

Top image):Kesennuma City, Miyagi Prefecture, March 27th, 2011 — A fishing vessel washed ashore by the tsunami.

Source: Kuni Takahashi/Getty Images

This article has been reprinted and translated from the Japanese original text published in Japan In-depth.20250221.