Japan's trust law, enacted more than 80 years ago, applies to trusts that were formed before 30 September 2007, the effective date of the new trust law which was enacted in December 2006. The new trust law overhauls the legal system with respect to Japanese trusts and will apply to trusts formed after its effective date. The new trust law also has a new definition of trust that provides for the formation of certain new types of trusts which are not available under the Trust Law. To deal with the changes made by the new trust law, the 2007 Tax Reform Act, enacted in March 2007, amended various laws, including the Income Tax Law and Corporation Tax Law. This article reviews the new trust law and its most important changes. The article also examines the classification of Japanese and foreign trusts and their income tax treatment under the old income tax rules (before the 2007 Tax Reform Act) and new income tax rules.