Japan Supports 20% Tax on Crypto Profits, Equal to Stocks

The Japanese government is currently considering a significant reduction in the maximum tax rate on crypto profits, to a uniform 20%. This move was proposed by the Japanese financial regulator, the Financial Services Agency (FSA), which announced a bill in November that will be presented in early 2026. The ruling coalition, which directs the course of political debate in Japan's parliament—the National Diet—has already expressed its support for these changes.

According to a report by Nikkei Asia, the new rules aim to align tax on crypto with that of other financial products, such as stocks and mutual funds. Current tax laws consider cryptocurrency trading as "miscellaneous income" under income tax for both individuals and businesses, with rates ranging from 5% to 45%. This can increase even further, especially for high-income earners, with an additional 10% resident tax. Unlike cryptocurrencies, however, the tax on assets such as stocks and mutual funds is set at a single rate of 20%, regardless of the amount of profit.

The tax changes have potentially far-reaching consequences for the domestic crypto market. The current high tax rates may have discouraged potential investors, who are deterred by the uncertain tax rules. Simplifying and reducing the tax burden could encourage new investment and boost the sector's growth.

A step towards a safer and more transparent crypto landscape

The proposed changes are part of a broader plan presented by the FSA, aimed at creating a robust investment protection framework. This proposal is linked to amendments to the Financial Instruments and Exchange Act, which not only address the tax structure but also the regulation of crypto trading. The FSA has indicated its intention to submit the bill during a regular session of the Diet in 2026, and it includes ambitious oversight measures, including a ban on trading with non-public information and stricter investment disclosures.

De Japan The Blockchain Association (JBA)—the leading non-governmental lobby group focusing on crypto in Japan—has been advocating for these necessary changes for nearly three years. In July 2023, the JBA published a letter to the government proposing a 20% tax rate to create a more level playing field in line with other investment opportunities. The letter pointed out that the current tax rules pose the greatest barrier to businesses in the Web3 sector and discourage the public from actively owning and using crypto assets. While it is unclear whether the JBA directly influenced the FSA's thinking, it is evident that the regulator has since taken an increasingly active role in pushing for reform.

Frequently Asked Questions

Why has the tax rate on crypto been so high in Japan?
The high tax rates stem from the fact that crypto is classified as "miscellaneous income," leading to a tax bracket of up to 45% for top earners. This contrasts sharply with the simplified tax structure for other financial products, such as stocks, which are taxed at a flat rate of 20%.

What impact could these tax changes have on the Japanese crypto market?
The expected tax rate reduction could act as a catalyst for renewed interest and investment in the Japanese crypto market. The lower tax burden could attract more investors, potentially accelerating the sector and fostering innovation within crypto-related companies.

How does Japan's approach compare to other countries?
Japan's move to a uniform 20% tax rate on crypto profits is a breath of fresh air compared to countries that apply variable and often high rates. This could make Japan more attractive to international crypto investments and businesses seeking a stable and predictable tax environment.