According to the Nikkei Shimbun, the Japanese government and the ruling Liberal Democratic Party are actively promoting a major reform of the tax system for cryptocurrency trading gains. Under the currently discussed plan, Japan will implement a uniform tax rate on cryptocurrency trading gains in the future, imposing a 20% tax regardless of the transaction size. This adjustment will align the tax treatment of cryptocurrencies with traditional financial products such as stocks and investment trusts, marking a critical step in Japan's tax system design for the digital asset sector.

Core Content and Objectives of the Tax Reform

Under Japan's current tax laws, cryptocurrency trading gains are classified as "miscellaneous income" and subject to comprehensive taxation. This means investors' crypto asset gains must be combined with other income, such as salary and business income, and taxed at progressive rates based on total income levels, with the highest rate reaching up to 55%. This high-tax structure is believed to have somewhat suppressed the activity of the domestic cryptocurrency market and placed Japan at a disadvantage in competition with other financial centers.

The reformed plan aims to introduce a separate taxation mechanism, isolating cryptocurrency trading gains from other income and taxing them separately at a fixed rate of 20%. The core objective of this move is to reduce the tax burden on investors, enhance Japan's attractiveness in the global digital asset market, and thereby revitalize the domestic trading market. The government expects that a more reasonable and competitive tax system will attract more individual and institutional investors, fostering the healthy development of related technological innovations and the market ecosystem.

Reform Process and Legal Framework

The Japanese government plans to include this tax system adjustment in the 2026 tax reform outline, which is expected to be finalized by the end of this year. If progress proceeds smoothly, the new tax system may be gradually implemented in the coming years.

Simultaneously, to build a more robust regulatory framework, Japan's Financial Services Agency (FSA) also plans to submit an amendment to the Financial Instruments and Exchange Act to the Diet in 2026. The amendment aims to strengthen the regulation of cryptocurrency trading activities, focusing on:

Explicitly Prohibiting Insider Trading: Strictly banning cryptocurrency trading using undisclosed material information, aligning with traditional securities market rules to ensure market fairness.

Strengthening Information Disclosure Obligations: Requiring cryptocurrency issuers to fulfill necessary information disclosure duties to enhance market transparency and protect investor rights.

Improving Investor Protection Mechanisms: Reducing the risks of market manipulation and fraud through the refinement of a series of regulatory measures.

Market Impact and Long-Term Outlook

The dual approach of tax reform and regulatory strengthening is expected to bring structural changes to Japan's cryptocurrency market. On one hand, the significant reduction in tax burden will directly increase investors' actual returns, potentially attracting more capital inflow. On the other hand, clear regulatory rules will help reduce market uncertainty and boost the confidence of institutional investors.

Notably, with the implementation of the tax reform, investment trust products containing cryptocurrency components are expected to be approved in Japan. The opening of such financial products will provide ordinary investors with more convenient and compliant channels for digital asset allocation, further broadening the market participation base and potentially spurring more diversified crypto-financial innovations.

Conclusion

Japan's current tax system adjustment reflects its policy approach of seeking a balance between "encouraging innovation" and "regulating development" in the emerging field of digital assets. By unifying and moderately reducing the tax rate on cryptocurrency trading gains and aligning it with the tax treatment of traditional financial assets, Japan aims not only to enhance the vitality of its domestic market but also demonstrates its strategic intent to secure a more favorable position in the rapidly evolving global digital financial landscape. In the future, the synergistic effects of tax reform and the advancement of the regulatory framework will serve as key indicators for observing whether Japan's digital asset market can achieve sustainable and steady growth.