Reflecting Financial Income in Medical and Long-Term Care Insurance Premiums: Ability-Based Burden vs the NISA Consistency Dilemma
In November 2025, Health, Labour and Welfare Minister Ueno told the Health Insurance Subcommittee of the Social Security Council that the government would advance the institutional design of a new framework reflecting financial income in medical and long-term care insurance premium calculations. The framework is also explicitly written into Basic Policy 2025 (cabinet decision, June 13, 2025), with FY2028 as the target. Two issues drive the debate — "eliminating an existing asymmetry" and "policy consistency with NISA promotion." Under the current system, dividends on listed shares enter the premium base if the recipient files a tax return, but not if they don't. The same financial income produces different premiums depending solely on whether the return is filed. Meanwhile, the government's "savings-to-investment" push and the permanence of New NISA pull in the opposite direction. This article unpacks the MHLW/MOF design, the line drawn around NISA, and the often-conflated distinction between intra-generational ability-based redistribution and inter-generational burden reallocation.
TL;DR
- In November 2025, Minister Ueno indicated to the Health Insurance Subcommittee that the government would advance the design of a new framework reflecting financial income in premium calculations. Basic Policy 2025 (cabinet decision, June 13, 2025) explicitly endorses this direction; FY2028 is widely cited as the target. The design follows a three-party agreement among LDP, Komeito, and Nippon Ishin.
- The current asymmetry: dividends on listed shares are taxed at source (20.315%), and filing a tax return is optional. Filing pulls the income into municipal taxable income and thus into premium calculation; skipping the return excludes it. Two people with the same financial income end up paying different premiums depending only on filing choice.
- MHLW's draft excludes NISA gains from the new reflection scheme (they are tax-free). Yet the policy push to 'shift from savings to investment' and the move toward 'reflect financial income in premiums' are in tension. Even if NISA-only gains stay outside scope, investment returns routed through specific accounts (with withholding) will be inside scope, so the impact on investment behavior cannot be entirely sidestepped.
What Is Happening
Minister Ueno (Nov 2025): financial-income reflection in premiums. Basic Policy 2025 endorses. FY2028 target
In November 2025, Health, Labour and Welfare Minister Ueno indicated to the Health Insurance Subcommittee of the Social Security Council that the government would advance the institutional design of a new framework reflecting financial income in medical and long-term care insurance premium calculations. As reported by NHK NEWS WEB and CBnews Management, this builds on a three-party agreement among the LDP, Komeito, and Nippon Ishin, with concrete design to proceed in the subcommittee.
The direction is not ad hoc. Basic Policy 2025 (cabinet decision, June 13, 2025) states that "with regard to reflecting financial income in burden under medical and long-term care insurance, while taking into account the current state of statutory reports in the tax system as well as issues such as MyNumber notation and online submission of information, fairness of burden, and administrative load on parties concerned, concrete institutional design shall proceed." Multiple reports cite FY2028 as the target implementation year.
Two Pillars of Reform
The proposed reform has two pillars.
The first is capturing financial income. Today, dividends on listed shares are settled by withholding at 20.315% (income tax 15.315% plus inhabitant tax 5%). Filing a return is optional; if filed, the income is recalculated under aggregate or separate taxation and feeds into municipal taxable income. If not filed, it does not. The new design combines MyNumber notation with online submission of statutory reports to capture financial income regardless of filing choice.
The second is strengthening ability-based burden. According to the MHLW, social security spending in the FY2025 budget reaches ¥140.7 trillion, equal to 22.4% of GDP. Financing comes from premiums of ¥82.2 trillion (59.8%) and public funds of ¥55.3 trillion (40.2%). The reform sits beside efforts to contain benefit growth and aims to push premium burden closer to true ability-to-pay.
Background & Context
Filing-or-not asymmetry. MyNumber + online statutory reports = capture mechanism. Three-party agreement
The Current Asymmetry — File and It Counts, Skip and It Doesn't
Why is financial-income reflection on the agenda now? The starting point is the inequity embedded in the current design.
- 1.Withholding (20.315%)
- 2.Voluntary filing — aggregate or separate
- 3.Included in municipal taxable income
- 4.Included in premium base
- 1.Withholding (20.315%)
- 2.Choose 'no filing'
- 3.Excluded from municipal taxable income
- 4.Excluded from premium base
As the MHLW April 2024 subcommittee document explains, dividends and capital gains on listed shares are settled by withholding only; filing a tax return is optional. If filed, the income is recalculated and enters municipal taxable income; if not filed, it stays out.
This produces a sharp structural asymmetry. Two people with identical financial income may face different premiums solely because one files and the other does not. They are economically equivalent, yet the institutionally optional choice "to file or not" determines burden. This plainly conflicts with ability-based principles.
The LDP framed this issue clearly in April 2024 as "eliminating inequity in premium calculation arising from whether a return is filed." The MOF Financial System Council supported the same direction in November 2025.
MyNumber + Online Statutory Reports as the Capture Layer
The institutional core is a mechanism to capture financial income whether or not the recipient files. The mechanism has three components.
First, mandatory MyNumber notation on statutory reports filed by financial institutions to tax authorities. This lets the tax office aggregate financial income by individual.
Second, online data sharing between tax offices and municipalities, replacing today's paper-and-batch-delayed pipeline with real-time or annual automated flows.
Third, municipal premium-calculation logic updates so that national health insurance, late-elderly medical care, and long-term care insurance all incorporate the captured financial income.
Because these technical foundations depend on MyNumber card adoption and revisions to statutory-report formats, FY2028 (with some reports citing FY2029–2030) is the target.
Three-Party Agreement and All-Generations Social Security
The reform is not a standalone change; it sits inside the all-generations social security reform agenda. The Council for the Realization of All-Generations Social Security has, since 2022, treated inter-generational and intra-generational fairness as central, pushing toward stronger ability-based contributions from elderly and high-income groups to relieve working-age premium pressure.
The 2025 three-party agreement (LDP, Komeito, Nippon Ishin) politically anchored this direction. Reflecting financial income in premiums is one concrete measure inside that agreement. Parallel measures include raising the late-elderly premium cap (¥800K → ¥850K in FY2026), expanding the 30%-copayment scope, and reviewing insurance coverage of OTC-equivalent drugs.
Reading the Structure
NISA vs ability-based premiums tension. Intra-gen redistribution, not inter-gen gap closure
NISA Promotion vs Ability-Based Premiums
The reform's central tension is policy consistency with the parallel push to move "from savings to investment."
- NISA gains: out of scope (tax-free)
- Specific account (withholding) dividends: planned in scope
- Separate-filed gains: already in scope
- Aggregate-taxed gains: already in scope
New NISA became permanent in 2024, with an annual ¥1.2M tsumitate slot, ¥2.4M growth slot, and a lifetime tax-free holding cap of ¥18M. "Build retirement assets via investment" has been the government's loud message. Reflecting financial income in premium calculation, however, positions investment returns as a source of premium burden.
The two pull in opposite directions. As the Nikkei reports, the MHLW draft places NISA gains outside scope — NISA is a tax-free account whose gains do not enter municipal taxable income to begin with. With that line, the government can claim "NISA promotion is unchanged."
The line, however, does not end the issue. Many investors in the "savings-to-investment" flow route money through specific accounts (with withholding). Additional investment after exhausting the NISA quota, or holdings in pre-NISA-migration legacy accounts, all fall inside scope. The impact on investment behavior cannot be fully avoided by NISA-only exclusion.
How to connect "savings-to-investment" with "ability-based premiums" — that is the principal question for the FY2028 design.
Intra-Generational Redistribution vs Inter-Generational Reallocation
The second structural point is that this is intra-generational ability-based redistribution, not inter-generational burden reallocation.
Working-age social insurance premium rates have risen almost continuously since the 1990s. As MOF Financial System Council material shows, combined health-plus-pension premium rates reach around 30% for working-age employees. Elderly medical and long-term care premiums are calculated on ability-to-pay basis, but the omission of financial income made that ability-to-pay measurement incomplete.
This reform strengthens ability-based premiums for the financial-asset-holding population, including the elderly. It is intra-generational redistribution toward the asset-holding tier. It does not directly reduce working-age premium rates. Narrowing inter-generational gaps requires either lowering working-age rates or restraining benefits separately.
Press coverage and political rhetoric often conflate the two. "Reflect financial income → working-age burden drops" is not an institutional certainty. There is no guarantee that additional premiums collected on an ability basis will flow into working-age rate reductions; they are more likely to be absorbed by the growth of the ¥140.7T social security spending envelope itself.
Design Issues Left Open
Three design issues will need foregrounding before implementation.
First, handling MyNumber non-adopters. Mandating MyNumber notation on statutory reports does not capture income for those without a MyNumber Card properly registered with financial institutions. According to the Digital Agency, population-base holding rate reached about 80% (80.3%) in December 2025, with cumulative issuance exceeding 100 million cards. Younger groups (0–14 years) show relatively lower rates, and the separate question of whether holders have registered their MyNumber with financial institutions remains. The capture mechanism must run alongside a non-registrant-handling design.
Second, filing-incentive redesign. Today, taxpayers file returns to use loss-offsetting or carry-forward provisions. Once financial income is captured comprehensively, the marginal benefit of filing narrows, but loss-offsetting remains important. How the new system organizes filing-vs-non-filing in practice will significantly affect user experience.
Third, spillover on small-scale and short-term investing. Even with NISA outside scope, small specific-account dividends will count: monthly dividends of ¥10K can add ¥120K annually to municipal taxable income, with a corresponding premium impact. For low- and middle-income small investors, the proportional impact may be larger than for high-income investors — a disjunction with the headline message of "ability-based burden strengthening for the wealthy."
"Savings-to-investment" and "all-generations social security" are two pillars at the center of Japanese economic and social policy. How their fault line gets drawn during the run-up to FY2028 will reveal how seriously the government is willing to take both. For a fuller institutional context on ability-based contributions and inter-generational fairness in Japanese social security, see Teruyuki Katori, 『教養としての社会保障』 (Social Security as Liberal Arts) (Toyo Keizai Shinpōsha, 2017).
Related Articles
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Ability-based contributions under social insurance and the intra-generational fairness debate
The History of Social Insurance Premiums and Take-Home Erosion
Long-run structure of working-age premium rate increases
Pension Inter-Generational Inequality
Structures of benefits and burdens across generations
References
Treatment of Financial Income in Health Insurance (Health Insurance Subcommittee material) — Ministry of Health, Labour and Welfare (April 2024)
Basic Policy on Economic and Fiscal Management and Reform 2025 — Cabinet Office (June 2025)
Minister Ueno: Advance new framework reflecting financial income in medical and long-term care premium calculations — NHK NEWS WEB (November 2025)
Financial Income Reflected in Social Insurance Premiums — MHLW Draft — CBnews Management (November 2025)
Medical/Care Premium Financial-Income Reflection Plan — NISA Gains Out of Scope, MHLW — Nikkei (Japan Economic Newspaper) (June 2024)
Reflect Financial Income Appropriately in Social Insurance Premiums — Discussion to Eliminate Inequity from Filing Choice — Liberal Democratic Party (2024)
Social Security ① (Material 3) — MOF Financial System Council (November 2025)
Social Security Material — MOF Financial System Council (November 2024)
Benefits and Burden — MHLW (2025)
