Haciyev Reşit 
Japan is preparing to fundamentally overhaul its taxation system for cryptocurrency income. Under a new reform that aims to classify crypto gains in the same category as traditional investment products, the government plans to apply a flat 20% tax rate. The reform seeks to reduce the heavy tax burden that local investors have complained about for years, while improving Japan’s competitiveness in the global crypto market.
Crypto to Be Treated Like Stocks
According to a report by Nikkei, the Japanese government and ruling coalition are working on a model in which crypto trading profits will no longer be classified together with salary, business income, or miscellaneous earnings. Under the new system:
- 15% tax will go to the central government
- 5% tax will go to local authorities
This adds up to a flat 20% tax rate. The reform marks the first time crypto investors’ demands for a simpler and fairer taxation system are being taken seriously.
Why Was the Current System Problematic?
Currently in Japan, crypto gains are categorized as “other income” and are subject to a progressive tax rate ranging from 5% to 45%. With an additional 10% local tax, the total burden for high-income individuals can reach up to 55%.
Industry representatives have long argued that such high rates:
- Reduce local investor participation
- Push corporate operations offshore
- Limit growth in local crypto trading volumes
If implemented, the new system would place digital assets under the same tax regime as stocks and investment funds, marking a major step toward standardization.
When Will the Reform Take Effect?
The plan is expected to be included in Japan’s 2026 tax reform proposal, to be announced at the end of the year. According to Nikkei Asia, the reform — drafted by the Financial Services Agency (FSA) has already received official support from the government and ruling party.
The bill could be submitted to Parliament as early as early 2026.
This timeline aligns with Japan’s broader strategy to strengthen its crypto sector. During the same period, trading volumes on regulated exchanges have risen. The Japan Virtual and Crypto Assets Exchange Association (JVCEA) reported that spot volume exceeded $9.6 billion in September.
A Historic Opportunity for the Industry
Experts believe the reform could accelerate the mainstream adoption of crypto in Japan. With a simplified tax rate:
- More retail investors may enter the market
- High-income investors may return to Japan
- Local exchanges may see higher liquidity
Additionally, Japan aims to position itself as a more investor-friendly market in global competition.
Analysts commented:
“Taxing crypto gains at a flat 20% will simplify investor behavior and could make Japan one of Asia’s most competitive crypto markets.”
Conclusion
Japan’s plan to introduce a flat 20% tax on crypto gains has the potential to become one of the country’s most impactful reforms in the digital asset sector. Eliminating tax rates that can reach up to 55% could revive investor interest and bring long-awaited stability to the market.
The reform signals Japan’s shift toward a more crypto-friendly stance, both locally and internationally. By encouraging capital inflows and increasing trading volumes, the policy could become a key pillar of the nation’s financial innovation strategy.
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