According to the Ministry of Health, Labor and Welfare, about 86 percent of Japanese companies pay their employees' tsukin teate, or "commuting allowance." To many Japanese the high rate will probably be less surprising than the fact that not all companies pay it. It's a common misconception that the allowance is somehow a legal mandate, but it isn't.
Employers don't have to pay their workers' transportation expenses, but most do. In fact, as the so-called lifetime employment system that was so central to Japan's postwar economic growth has slowly been abandoned over the past two decades, more companies have opted to either cut back on transportation allowances by limiting the amounts, or eliminating them altogether. The above figure is for regular full-time employees, and the growing trend among employers now is to hire non-regular employees, either as temps or contract workers.
But while transportation expenses are not legally mandated, they are regulated. Companies can write them off as business expenses, but only up to ¥100,000 a month per employee. If an employee's commuting costs exceed ¥100,000 in a month, the excess is subject to tax as if it were income.