The Japanese government is reportedly preparing to support a substantial overhaul of how the country taxes cryptocurrency gains, aligning with a proposal for a flat 20% tax rate. Japan’s Financial Services Agency (FSA) first outlined the potential reform in mid-November, indicating that a draft bill could be submitted in early 2026. According to local reports, the government and ruling coalition — the parties that control the National Diet — now appear ready to back the plan.

Aligning crypto With traditional investments

A report from Nikkei Asia on Sunday said the objective is to bring crypto taxation in line with equities and investment trusts, which already fall under a uniform 20% capital gains tax.

Currently, crypto profits fall under “miscellaneous income,” meaning individuals and businesses are taxed at progressive rates ranging from 5% up to 45%, with higher earners facing an additional 10% inhabitant tax. This structure stands in stark contrast to traditional assets and has been viewed as a deterrent to broader participation in the crypto market. The proposed shift could revitalize domestic crypto activity by removing what many investors see as an excessively heavy tax burden.

According to the Nikkei report, the new framework would be introduced within a “solid investor-protection framework” under the FSA’s plan to amend the Financial Instruments and Exchange Act. The bill would also expand oversight of crypto-related activities, potentially banning the use of non-public information and tightening rules around investment disclosures.

A long-awaited change for Japan’s crypto industry

The Japan Blockchain Association (JBA), the country’s leading crypto advocacy group, has been pushing for this shift for nearly three years. In July 2023, the JBA issued a public letter urging the government to implement a flat 20% tax rate to match other investment products.

“This letter requests a review of tax on crypto assets, which is the biggest hurdle for companies operating Web3 businesses in Japan and a disincentive for the public to actively own and use crypto assets,” the letter reads.

While it remains uncertain whether the JBA directly influenced the regulators’ stance, the FSA began signaling greater openness to crypto tax reform in September 2024 — marking the start of what now appears to be a decisive policy shift.

Sources:

https://cointelegraph.com/news/japan-gov-backs-flat-tax-crypto-profits

https://x.com/WatanabeSota/status/1995378242803655005