The Japanese government is reportedly supporting plans to implement a significant reduction in the nation’s maximum tax rate on cryptocurrency profits, establishing a flat rate of 20% for all taxpayers.
Japan’s financial regulator, the Financial Services Agency (FSA), initially proposed these tax changes in mid-November. The agency outlined intentions to introduce a bill in early 2026, and now both the government and its ruling coalition have indicated their agreement with the proposal.
According to a report by Japanese news outlet Nikkei Asia, the new rules aim to harmonize crypto taxation with that of other financial products, such as equities and investment funds.
Under the current Japanese laws, taxes on crypto trading are incorporated into income taxes for both individuals and businesses. This income is categorized as “miscellaneous income,” with tax rates varying from 5% to 45%, depending on income level. High-income earners may also be subject to an additional 10% inhabitant tax.
In contrast, assets like equities and investment trusts are taxed separately at a flat rate of 20% on profits, irrespective of the profit amount.
These potential tax changes could significantly benefit the domestic cryptocurrency market, as the current higher tax rates may have previously discouraged potential investors.
The Nikkei report indicates that the proposed changes to crypto taxation in Japan will be introduced as part of a comprehensive “solid investor-protection framework” within the FSA’s bill, which seeks to amend the Financial Instruments and Exchange Act.
The FSA plans to submit this bill during the regular Diet session in 2026. The initiative is part of a broader effort to enhance oversight of crypto trading, including measures to prohibit the use of non-public information and enforce stricter investment disclosures.
Japan's Long Road to Crypto Tax Reform
The Japan Blockchain Association (JBA), the country's primary non-governmental lobbying group for the cryptocurrency industry, has been advocating for these tax changes for nearly three years.
In July 2023, the JBA published a letter on its website addressed to the government, detailing key tax reform requests intended to support the industry. The letter specifically called for the implementation of a 20% tax rate, aligning crypto taxation with that of other investment vehicles.
The JBA's letter stated, "This letter requests a review of tax on crypto assets, which is the biggest hurdle for companies operating Web3 businesses in Japan and a disincentive for the public to actively own and use crypto assets."
Although the extent of the JBA's direct influence on the FSA's decision-making is not definitively known, the financial watchdog began to show increased openness to the idea and started pushing for reform in September 2024.