Introduction

My primary field of research is tax law, which analyzes the legal aspects of taxation systems. Through my research on taxation, I have developed an interest in Article 29 of the Constitution, which guarantees property rights, and I have written several academic papers on the article. Here, I will introduce a Supreme Court ruling that prompted me to investigate Article 29 and discuss several issues that I find particularly intriguing.

Tax reform and application of new legislation

In Japan, tax statutes are amended every year. In December of the preceding year, the ruling parties formulate their tax reform outline, and the Cabinet then adopts a government tax reform outline that generally follows the contents of the outline. In February, the Cabinet approves the Bill for Partial Revision of the Income Tax Act, and then submits it to the Diet. The bill is then passed and enacted by the end of March, and the amended act takes effect on April 1.

However, income tax is levied on an individual's income earned over the calendar year, from January 1 through December 31. In other words, the income tax liability arises at the end of December 31 (Article 15, Paragraph 2, Item 1 of the Act on General Rules for National Taxes). The content of that liability is determined in accordance with the provisions of the Income Tax Act in force at that time. Thus, when calculating an individual's tax liability on annual income at year-end, any amendment to the act is naturally reflected in the calculation. Since taxable income is determined on the basis of a person's day-to-day economic activities, even income generated from economic activities conducted between January and March, before the new act takes effect on April 1, becomes subject to the new act.

Amendments to the taxation of capital gains

One taxpayer found this situation problematic and brought a lawsuit that ultimately resulted in a Supreme Court judgment. The case concerned the 2004 tax reform. This reform modified the tax treatment of real estate transfers. Although the reform as a whole reduced tax burdens for many taxpayers, it increased the burden for certain individuals. The plaintiff had transferred real estate in early March 2004. Under the old provisions, the loss generated by the transfer could have been offset against other income, thereby reducing his tax liability. Under the new provisions, however, such offsetting was no longer permitted, resulting in a higher tax burden. The plaintiff argued that it was unreasonable for the tax consequences of a transaction conducted in March to be determined by legislation that only came into force on April 1. According to the plaintiff, this violated Article 84 of the Constitution, which embodies the principle of statute-based taxation.

It should be noted that Article 39 of the Constitution prohibits retroactive criminal legislation, meaning legislation that retrospectively criminalizes conduct that was lawful when committed and imposes punishment on that basis. However, the purpose of Article 39 is to prevent punitive sanctions that involve moral condemnation of conduct. Taxation, by contrast, although disadvantageous to taxpayers, contains no element of condemnation. Consequently, taxes fall outside the scope of Article 39. An older Supreme Court decision stated that, with respect to laws other than criminal statutes, "the Constitution does not prohibit legislation from having retroactive effect" (Supreme Court judgment of May 18, 1949).

Supreme Court judgment of September 22, 2011

The Supreme Court ruled as follows. First, if the point at which the tax liability arises is used as the basis for determining retroactivity, the 2004 amendment did not constitute retroactive legislation. However, applying the new provisions in this case altered the taxpayer's "status under tax statutes" and could therefore affect "legal certainty in tax matters." Furthermore, the Court noted that Article 84 of the Constitution "embodies the principle that legal certainty in tax matters should be maintained."

The Supreme Court went on to state that, in determining whether the effect of a legislative amendment on legal certainty in tax matters is consistent with the purpose of Article 84 of the Constitution, it is useful to refer to the framework adopted in a Supreme Court judgment of July 12, 1978. In that case, the Court considered, in light of Article 29 of the Constitution, whether the content of property rights once established by statute could subsequently be modified through later legislation. Applying this framework, the Court stated that the relevant inquiry is whether the impact on legal certainty resulting from a mid-year amendment to tax legislation and its application from the beginning of the calendar year constitutes a reasonable restriction on the taxpayer's status under tax statutes. The Court ultimately concluded that, although taxpayers' expectations in the present case deserved some protection, the need to apply the new provisions to the calculation of 2004 income tax was more compelling. Accordingly, the Court held that the amendment did not violate the Constitution.

Implications of the judgment and my research

The facts of this case and the reasoning behind the judgment offer a range of insights into the implications of the state imposing monetary obligations, including tax liabilities, on individuals. They also shed light on the significance of the state frustrating people's expectations by changing its policies, as well as the role the Constitution can play in protecting people against such actions. Drawing on these insights, I have explored the following questions.

1. Does the imposition of monetary obligations raise an issue under Article 29 of the Constitution?

First, moving somewhat away from the judgment discussed above, there is the question of whether the state's imposition of monetary obligations on individuals raises an issue under Article 29 of the Constitution. The provision primarily stipulates that the state must provide just compensation when it expropriates property rights, such as rights to land. However, many scholars in Japan understand it as also governing other aspects of the property rights system in a broad sense. A prominent view in other countries, however, is that the imposition of monetary obligations, including taxes, does not in itself raise an issue of property rights. The reasoning is that monetary obligations, including tax liabilities, are paid out of an individual's overall wealth or assets, which consist of a collection of individual property rights. Consequently, their impact on any particular property right is only indirect.

2. Does the frustration of people's expectations raise an issue under Article 29 of the Constitution?

A second question is whether, as in the 1978 Supreme Court judgment, the frustration of people's expectations should be treated as an issue under Article 29 of the Constitution. In Japan, Supreme Court rulings after World War Two have considered this question under Paragraphs 1 and 2 of Article 29. Some legal scholars, however, argue that it should instead be addressed under Article 13 of the Constitution, which protects the right to pursue happiness, or Article 31, which guarantees due process of law. This alternative approach finds some support in comparative constitutional law. In Germany, courts assess legislation that disappoints legitimate expectations under a constitutional provision comparable to Article 13 of the Japanese Constitution. In the United States, similar issues are often examined under constitutional provisions analogous to Article 31.

3. Should expectations and reliance be the starting point at all?

A further question is whether expectations, reliance, and legal certainty should be protected as a matter of constitutional law, as contemplated in the 1978 judgment and the judgment discussed above. The state makes decisions through legislatures and executive bodies composed of representatives of the people at a given point in time, and those decisions may harm people's existing interests to varying degrees. For this reason, I find persuasive Julian N. Eule's argument that, instead of focusing on how much people's expectations are disappointed, we should ask whether the state's decisions at a given point in time significantly conflict with the decisions people made in the past or will make in the future.

Conclusion

Through examining judgments handed down by courts in Japan and abroad, as well as academic articles, both old and new, from Japan and other countries, legal scholars seek to say something new and contribute something useful to society. In the process, we come to appreciate how people across different eras and countries have grappled intensely with issues much like those we face today in Japan. Dialogue with judicial precedents and academic literature can also yield ideas for fundamentally challenging things that are generally taken for granted. Such criticism can sometimes move society in a positive direction, just as groundbreaking inventions and discoveries in the natural sciences can.

Keigo Fuchi／Professor, Chuo Law School
Areas of Specialization: Public Law and Tax Law

Keigo Fuchi was born in 1975. He graduated from the Faculty of Law at the University of Tokyo in 1998 and subsequently became a research associate at the University of Tokyo Graduate Schools for Law and Politics. After serving as a Professor at Gakushuin University and Kobe University, among other positions, he assumed his current position in April 2026.
His research broadly examines the role of public law in regulating people’s economic activities, with a primary focus on tax law. His recent research topics include the constitutional framework for protecting property rights under Article 29, the constitutional concept of tax, and the relationship between inheritance tax and income tax.
His major publications include Lectures on Tax Law (Yuhikaku Publishing, 2024) [in Japanese] and International Aspects of Income Taxation (Yuhikaku Publishing, 2016) [in Japanese]. His major articles include Unilateralism, Bilateralism, and Multilateralism in International Taxation, Japanese Yearbook of International Law, Vol. 59, p. 216 (2016), Stanley Surrey and the Transformation of Administrative Law in Japan, The University of Pennsylvania Asian Law Review, Vol, 15, p. 172 (2020), and Digital Platforms and Their Role in Collection of VAT/GST and RST, Japanese Yearbook of International Law, Vol. 64, p. 173 (2021).

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