Similar to other countries, child care plays an important role in determining labor participation of married women in Japan. In addition, Japans current lower female labor force participation could also be attributed to its spousal and tax deduction policies that provide disincentives for married women to work. To examine these issues, this paper employs a dynamic general equilibrium model with heterogenous households, which are differentiated by the main taxpayers income, spouses education level and preference on leisure. We find that the 2004 tax reform in Japan had minor effects on encouraging married womens labor participation. Based on the baseline economy with the 2004 tax reform, we further conduct policy experiments. We conclude that the effect of changing tax structure on encouraging married womens labor supply is larger than providing more child-care subsidies. Besides, heterogenous households response to policy reforms in different ways. Therefore, it is important to understand who are the policy target in order to formulate appropriate policies.