- Japan’s FSA proposes a 20% flat tax on crypto gains, replacing the current system of up to 55%.
- Loss carry-forward deductions for crypto trades could be introduced, mirroring stock rules.
- Japan prepares to approve its first yen-based stablecoin, JPYC, this fall.
Japan is preparing for a 2026 tax reform that could change its approach to digital assets. The Financial Services Agency (FSA) on Monday disclosed its reform outline, proposing revisions to cryptocurrency taxation and fresh regulatory groundwork for stablecoins.
Push for Fairer Crypto Taxation
Currently, individual cryptocurrency gains in Japan are classified as “miscellaneous income” and subject to progressive taxation of up to 55% when combined with salary and other earnings. The system has long been criticized by industry participants for discouraging wider adoption.
The FSA, in consultation with crypto industry associations, is advocating for a shift to separate self-assessed taxation, also known as declaration-based capital gains tax, that would apply a flat rate of around 20%, aligning crypto with equities.
Simplifying Tax Treatment
The move would not only simplify tax treatment but also reduce the financial burden on investors, encouraging greater participation in the crypto market.
The draft also allows the introduction of loss carry-forward deductions for crypto trading. At present, Japanese investors cannot offset crypto losses against future gains.
The FSA is pushing for a three-year carry-forward system similar to stock market rules, which would help mitigate risk and lower the barriers to entry for retail traders.
The proposals are expected to be submitted to the Ministry of Finance by the end of August. Discussions with the ruling coalition will continue through year-end, with the government aiming to pass related legislation during the 2026 regular Diet session.
Government’s Support for Crypto
Finance Minister Katsunobu Kato recently recognized cryptocurrencies as a potential component of diversified investment portfolios.
Speaking at the WebX 2025 conference in Tokyo, Kato acknowledged the volatility of digital assets but stressed that, with the right regulatory framework, crypto could provide valuable diversification for investors.
Yen Stablecoin Approval on the Horizon
Japan is also preparing to greenlight the issuance of its first domestic yen-denominated stablecoin.
Tokyo-based fintech firm JPYC is set to register as a money transfer business this fall, paving the way for the rollout of its token pegged at 1 JPY = 1 yen and backed by liquid assets such as bank deposits and Japanese government bonds.
If successful, JPYC could increase the demand for Japanese government bonds, mirroring the US trend where stablecoin issuers have become significant Treasury holders.
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