What is Japan’s new proposed tax structure? And how does it compare to the prevailing tax structure?
Crypto investors in Japan are bracing for a major tax shake-up in the country. On Jun. 24, Japan’s Financial Services Agency (FSA) proposed classifying crypto assets as financial products, similar to equities, bonds, etc. This reclassification would put crypto assets under the scope of the Financial Instruments and Exchange Act (FIEA), a regulatory framework that is applicable to traditional financial products in the country.
Japan has long been recognized as a global pioneer in cryptocurrency adoption and regulation alike. 2025 is shaping up to be a pivotal year for digital assets in the world’s fifth-largest economy. The FSA’s proposal is aligned with the government’s wider “New Capitalism” initiative, which aims to transform the nation into an investment-driven economy. By aligning crypto taxation with traditional financial products, Japan aims to solidify its position as a leading hub for digital assets.
In the existing tax regime in Japan, all profits from cryptocurrency transactions are classified as “miscellaneous income.” This entails that, unlike the profits from stocks or real estate, gains from trading, spending or earning crypto are subject to progressive income tax rates.
These rates usually range from 5% for lower incomes to a hefty 45% for the highest earners. Accounting for the 10% local inhabitant tax, the effective higher rate can go as high as 55%, making it one of the highest crypto taxes in the world.
Below is a comparison of the existing tax regime for crypto assets and the proposed tax regime:
Here, it is noteworthy that investors buying and hodling crypto, or even transferring assets between their wallets, are not triggering a tax event.
Apart from the changes in the tax rate, the most significant change is the ability for investors to allow loss carry forward for their crypto investments. This entails that investors can offset crypto losses against future gains for up to three years. Considering the volatile nature of the crypto markets, it would provide much-needed flexibility for investors.
