Japan's Crypto Assets tax reform is approaching: the tax rate may drop from 55% to 20% to stimulate the market.

Original | Odaily Odaily Daily Report (@OdailyChina)

Author | Wenser (@wenser 2010)

Original title: Japan plans to reform cryptocurrency tax rate to 20%, can it bring a new round of buying?

At the recently concluded WebX event in Japan, Satsuki Katayama, a member of the House of Councillors from the Liberal Democratic Party and Chairperson of the Budget Committee, stated on-site that Japan is currently exploring the reclassification of cryptocurrencies themselves, specifically redefining well-known crypto investment assets such as BTC and ETH. Japan’s current tax rate on crypto assets is as high as 55%, but if cryptocurrencies can be transferred from the Payment Services Act to the Financial Instruments and Exchange Act, the tax rate could be lowered to 20%, aligning it with stock tax rates. She also stated, “This reform is expected to be realized within a year or two and is anticipated to take effect soon. The direction of this reform has been decided by the Cabinet meeting — usually, this means strong promotion. However, since the Liberal Democratic Party currently lacks a majority in the parliament, we need to negotiate with other parties, which will take time and complicate the process a bit, but several parties share our ideas, so we will wait and see how things develop. The final conclusion must be settled before December.”

Odaily will provide a detailed analysis in this article to explore whether this tax rate reform can bring more variables to the cryptocurrency market.

The Unavoidable Cryptocurrency Tax Rate: The Economic Predicament under the “New Capitalism”

A close look at the cryptocurrency tax rate reform initiated by the Financial Services Agency of Japan and driven by the ruling Liberal Democratic Party reveals that its main impetus is the somewhat poor economic environment in Japan at present.

The Japanese Ministry of Health, Labour and Welfare released data in early July showing that in May, Japan’s real wages adjusted for inflation fell by 2.9% year-on-year, further widening from the revised decline of 2.0% in April, marking the largest drop since September 2023. In addition, the consumer price index used by the Ministry of Health, Labour and Welfare to calculate real wages (which includes fresh food prices but excludes rent costs) rose by 4.0% year-on-year in May, a significant increase that far exceeds the growth of nominal wages. In May, Japan’s rice prices soared by 101.7% year-on-year, the highest increase in over half a century.

Soaring prices, combined with previous remarks made by cabinet officials and issues related to commodity vouchers, have led to a continuous decline in the credibility of the ruling Liberal Democratic Party (LDP). On July 21, the counting of votes for the 27th House of Councillors election in Japan was completed, with the ruling coalition formed by the LDP and Komeito securing a total of 47 seats, failing to achieve the majority target of 50 seats and unable to maintain a majority in the House of Councillors. Additionally, the coalition did not achieve a majority in the House of Representatives previously, officially transforming the ruling coalition into a “minority government in both houses of the Diet.” This marks the first time since the establishment of the LDP in 1955 that a ruling coalition led by it has simultaneously lost the majority in both houses.

In addition, the Japan-US tariff negotiations are also affecting the pulse of the Japanese economy, influencing the changes and developments in both domestic and foreign economic situations in Japan. Today’s Japan is somewhat in a predicament of “internal and external difficulties.” In light of this, the Japanese government has no choice but to seek new solutions under the “new capitalism” policy. Specifically, the efforts made by the Japanese government include the following two aspects:

On one hand, it is to “increase income” for the public by raising the minimum wage. In early August, Japan’s Ministry of Health, Labour and Welfare’s Central Minimum Wage Council decided to raise the guideline for the nationwide weighted average minimum wage for the fiscal year 2025 to 1,118 yen per hour (approximately 54.60 yuan), an increase of 63 yen from the current 1,055 yen, representing a 6% rise, the largest increase since the implementation of the hourly wage system in 2002. This also marks the 23rd consecutive year of raising Japan’s minimum wage standard, and if implemented, the hourly wage in all prefectures will exceed 1,000 yen for the first time.

On the other hand, it is about “tightening the belt” for the public by lowering tax rates. Currently, this step is limited by party disputes and is still in the early stages. The Liberal Democratic Party has long been committed to promoting the reclassification of crypto assets and lowering tax rates to make Japan a development center for the Web 3 industry; however, opposition parties such as the Constitutional Democratic Party and the Democratic Party for the People have also made similar policy commitments in elections (such as the NFT and Web 3 measures proposed by Democratic Party for the People leader Yuichiro Tamaki). Therefore, after becoming a “minority government”, the pace of tax reform by the Liberal Democratic Party has inevitably been delayed to avoid being criticized as a “rich tax reduction policy”. This is also why cryptocurrency tax reform is seen as a new breakthrough, which is to change cryptocurrency from being regulated as a “payment method” under the Payment Services Act to a “financial product” under the Financial Instruments and Exchange Act.

As a result, cryptocurrency gains will be reduced from a progressive tax system of up to 55% (45% income tax + 10% resident tax) classified as “miscellaneous income” (excluding local taxes) to a uniform tax of 20% similar to stocks and bonds.

Japan’s Tax Reform “Two-Step” Strategy: First Revise Tax Law, Then Upgrade Regulation

It is worth mentioning that the tax reform in Japan is not something that can be accomplished overnight. Additionally, the involvement of cryptocurrency assets in the overlapping amendments of the Payment Services Act (PSA) and the Financial Instruments and Exchange Act (FIEA) makes the process more complex, while also being subject to the scrutiny of the Financial Services Agency (FSA) and the influence of parliamentary politics in Japan.

Currently, Japan’s tax reform will take place in two steps:

The first step is to revise the tax law, adjusting cryptocurrencies from the “comprehensive taxation” category to the same “separate declaration taxation” category as stocks, with the tax rate lowered to around 20% (15% income tax + 5.015% resident tax + reconstruction special tax).

The second step is further regulatory upgrades, specifically through legal amendments that reclassify cryptocurrencies as financial products, allowing the Financial Bureau to apply insider trading rules, information disclosure standards, and investor protection measures under the Financial Instruments and Exchange Act.

Behind the Crypto Tax Rate Reform: Crypto ETFs and Yen Stablecoins Gearing Up

It is worth noting that the above reforms are also seen as a preparatory move by Japanese regulators for the launch of cryptocurrency ETFs and yen stablecoins. It must be said that the current sluggish development of cryptocurrencies in Japan is somewhat related to previous security incidents such as the Mt.Gox Bitcoin theft case; and the high tax rates have also limited the trading activity in the cryptocurrency industry to a certain extent.

According to Shiraishi, vice president of the Japan Cryptocurrency Business Association, in the context of the global cryptocurrency market expanding from $872 billion to $2.66 trillion, the domestic trading volume in Japan has only increased from $66.6 billion in 2022 to an estimated $133 billion this year, with a growth rate of only about one time.

Meanwhile, a survey conducted by the Cornell Bitcoin Club showed that 88% of Japanese residents have never owned Bitcoin; however, a joint survey by Nomura Holdings and Laser Digital indicated that 54% of Japanese institutional investors plan to invest in crypto assets within the next three years.

Based on the above information, the reform of the crypto tax system, the launch of crypto ETFs, and the introduction of yen stablecoins are imminent. According to media reports, the first yen stablecoin approved by Japan’s Financial Services Agency—JPYC—is issued by a Tokyo fintech company of the same name, with plans to issue stablecoins worth 1 trillion yen (approximately $6.78 billion) over three years. This stablecoin will be backed by high liquidity assets such as deposits and government bonds, and its potential application scenarios include international remittances, corporate payments, and DeFi. Japan’s second-largest bank, Sumitomo Mitsui Banking Corporation (SMBC), had previously announced plans to collaborate with Ava Labs and Fireblocks to launch stablecoins.

Emerging industries such as cryptocurrency are seen as a “lifeline” for the development of Japanese society

The reason why the Japanese government attaches great importance to the cryptocurrency industry is that it sees the development potential of emerging industries represented by the cryptocurrency sector. At the WebX 2025 conference held in Tokyo, Japanese Prime Minister Shigeru Ishiba stated on-site that in the context of increasing geopolitical uncertainty, the strength of emerging industries has become extremely important to explore new economic growth paths. The Japanese government will continue to optimize the development environment for emerging industries and promote the development of emerging industries such as digital, semiconductors, AI, and space, including Web 3, through measures such as investment support and regulatory reforms to facilitate the vigorous growth of new industries.

Shirakubo Takashi also mentioned that the fundamental reason for Japan’s declining population is the excessive concentration of the population in Tokyo, along with a decrease in both marriage and birth rates, creating a vicious cycle. At this historical juncture, the government hopes to leverage the potential of new technologies such as Web 3 to bring new vitality to Japanese society. Web3 technology can assist in various reform measures promoted by the government, and through innovative applications of digital technology, it can not only enhance industrial competitiveness but also provide new solutions for social issues such as local development and changes in population structure.

Conclusion: When will the tax rate reform begin and when will it be implemented?

According to the cycle of legal changes in Japan, the tax reform process usually follows an annual advancement rhythm: a tax reform outline is published every December, submitted for parliamentary review in March-April of the following year, passed around June, and comes into effect in April of the following year. The current reform of cryptocurrency tax rates is somewhat urgent, so specific proposals are expected to be presented before the end of the year, with legislative action possibly taking place in early 2026.

As for the formal implementation, it may have to wait until June 2026 or even the second half of that year. Key figures pushing for this bill include Masaaki Taira from the Liberal Democratic Party’s Web 3 Project Team (Web 3 PT) (, Katsunobu Kato ), Noriyuki Hirosue, the President of JCBA and CEO of Bitbank (, and the aforementioned Satsuki Katayama, a member of the Japanese Liberal Democratic Party’s Senate and Chair of the Budget Committee.

At that time, the market is expected to welcome a new round of buying.