Could it cost more to stay in Japan? It very likely will – and you can thank overtourism for that. The good news is that you likely won’t notice.
More municipalities across Japan plan to introduce lodging taxes on hotel and inn stays, a Kyodo News survey found. The poll, covering 1,723 municipalities nationwide, showed 92 in 32 prefectures are considering new levies. Another 42 have already introduced them or are scheduled to do so.
Local governments say they’ll use the revenue to promote tourism and curb overtourism driven by the rising number of inbound visitors. The tax applies to both Japanese and foreign guests. This has sparked calls for greater transparency and the development of tools to measure effectiveness.
The fiscal dilemma behind Japan’s push for lodging taxes
Tourism in Japan has undergone significant change in recent years as tourist numbers have skyrocketed. Beyond the country’s major destinations, regions across the country are positioning tourism as a central pillar of local growth.
This shift is being fueled by the rebound in inbound travel, the diversification of visitor preferences, and intensifying competition among municipalities. Local leaders increasingly recognize that to remain attractive, they must make sustained and strategic investments.
The challenge lies in how to fund those investments. In many cases, the more a municipality spends on tourism, the heavier its financial strain becomes. Local governments already struggle to fund administrative services with traditional revenue sources such as property and resident taxes.
Given this, many rely heavily on central government transfers known as local allocation taxes. These transfers are designed mainly to cover services for residents and are distributed largely according to population size. This means that, even when tourist numbers rise, the transfers remain flat unless the resident population grows.
The problem is compounded by the fact that when tourism does increase local tax revenue, the central government often reduces the amount of allocation tax provided. As a result, municipal budgets tend to remain stagnant.
Spending more on tourism can therefore come at the expense of childcare, public welfare, public transport, and other essential services. This leaves municipalities in a difficult position: investment in tourism can strengthen the local economy, but it also risks shortchanging residents.
Lodging taxes as a stable revenue source
This fiscal dilemma has pushed lodging taxes to the forefront of policy debates. Lodging taxes are a type of extra-statutory levy that municipalities can introduce by ordinance, following reforms to Japan’s tax system in the early 2000s. Importantly, revenue from lodging taxes is not included when calculating local allocation taxes, meaning municipalities can use the proceeds as a true net gain.
Lodging taxes also align closely with tourism policy objectives. They are widely used internationally, and inbound travelers are generally familiar with the concept. The taxable base, overnight stays, is simple and linked to the ability of visitors to pay.
The collection process is relatively straightforward, minimizing the administrative burden on local authorities. Moreover, the factors that increase tax revenue, such as higher occupancy or room rates, directly support tourism promotion goals. Above all, lodging taxes offer municipalities a stable funding source over the medium and long term.
In this sense, lodging taxes are not seen merely as a tax hike. Rather, they represent a mechanism to reinvest in the tourism cycle, ensuring that visitors contribute to maintaining and improving the destinations they enjoy. By channeling revenue into infrastructure, public services, and community projects, municipalities aim to balance the needs of residents with the demands of a growing tourism sector.
Kyoto’s plans to raise its lodging taxes
Kyoto City, long known for its struggles with overtourism, is preparing to significantly raise the ceiling on its hotel accommodation tax. City officials have confirmed plans to increase the maximum levy from the current 1,000 yen per night to 10,000 yen.
The city plans to submit an ordinance amendment to the municipal assembly in February. If endorsed by the Minister of Internal Affairs and Communications, the changes could take effect in March 2026. According to the ministry, Kyoto’s 10,000 yen cap would be the highest nationwide that currently imposes fixed-rate lodging taxes. The city expects the revision to more than double annual revenue, generating around 13 billion yen.
Officials say they’ve used the funds for projects such as subsidies for cultural property restoration, burying power lines to improve the cityscape, and initiatives to provide tourist information and encourage responsible visitor behavior.
Kyoto reviews its lodging tax every five years. In 2024, the city convened a panel of experts from universities and economic organizations to assess the policy, holding three rounds of discussions. The panel concluded that addressing overtourism would require substantial funding and formally recommended raising the tax in November. The city has since been studying how to implement the increase.
Nationwide expansion in 2025
Lodging taxes fall into the category of extra-statutory purpose taxes, which municipalities may introduce by ordinance with approval from the Minister of Internal Affairs and Communications. Officials review applications based on the three principles of local taxation: fairness, neutrality, and simplicity. They generally approve taxes as long as the levies do not excessively overlap with existing ones, distort regional economic activity, or conflict with national economic policy.
As of July 2025, 12 municipalities had already implemented lodging taxes, with another 23 approved and preparing for introduction. Several others had passed ordinances, while many more were still in discussion stages, signaling strong nationwide momentum for adoption.
Some have argued that Japan’s lodging taxes should apply only to foreign visitors, saying this would reduce the burden on residents coping with a weak yen. However, experts and past reporting suggest that such a system would be difficult to enforce fairly and could risk discrimination.
For now, municipalities plan to continue applying the taxes universally, even as some explore two-tier pricing for attractions such as museums and historical sites.
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Sources
宿泊税、全国92自治体が検討 訪日客増で導入拡大. Kyodo News
京都市 宿泊税の上限1泊1万円に引き上げへ 導入自治体で最高額. NHK News
宿泊税とは？ 全国で導入が進む背景と制度のポイントを解説. Yamatagokoro
