Japan Backs Major Crypto Tax Overhaul With Flat 20% Rate

Source: DefiPlanet Original Title: Japan Backs Major Crypto Tax Overhaul With Flat 20% Rate Original Link: https://defi-planet.com/2025/12/japan-backs-major-crypto-tax-overhaul-with-flat-20-rate/

Quick Breakdown

• Japan’s government supports cutting crypto tax rates to a flat 20% to match equities and investment funds.
• The FSA plans to submit a reform bill in early 2026 under a broader investor-protection framework.
• The move follows years of lobbying from the Japan Blockchain Association for fairer tax treatment.

Japan moves toward long-awaited crypto tax reform

Japan is preparing to slash taxes on cryptocurrency profits, with the government and ruling coalition now backing a proposal to introduce a flat 20% tax rate. The shift marks a significant departure from the country’s current system, where crypto gains are taxed as “miscellaneous income” and can climb as high as 55% for top earners.

The Financial Services Agency (FSA) first floated the idea in mid-November, and according to recent reports, the government is now fully aligned with the regulator’s push to simplify and modernize Japan’s crypto tax regime.

Aligning crypto with traditional investments

Under existing rules, crypto profits are lumped into income tax calculations, resulting in a sliding rate between 5% and 45%, plus a potential 10% inhabitant tax. This framework has long been criticized for discouraging investment and complicating tax reporting.

By contrast, equities and investment trusts enjoy a straightforward 20% separate tax, a structure the new proposal aims to mirror.

The reform could breathe new life into Japan’s digital asset sector, with analysts suggesting that high tax burdens have held back both retail and institutional participation.

Regulator plans 2026 bill with strong oversight measures

The FSA intends to submit its reform bill during the 2026 regular Diet session. Beyond tax changes, the legislation will introduce broader investor protection measures, including restrictions on trading based on non-public information and tighter disclosure rules.

Officials say the goal is to develop a robust, internationally aligned regulatory framework while making Japan a more attractive environment for crypto innovation.

Years of industry pressure finally paying off

The proposal comes after nearly three years of lobbying from the Japan Blockchain Association (JBA). In 2023, the group urged the government to shift crypto taxes to a flat 20% scheme, arguing that the current system is a major barrier for Web3 companies and everyday users.

While the scale of JBA’s direct influence remains unclear, the FSA began signalling openness to reform in late 2024, paving the way for the current political momentum.