by Japan is gearing up for a major shift in its approach to cryptocurrency taxation and regulation, signaling a more open stance toward digital assets and Web3 innovation.
Japanese Prime Minister Shigeru Ishiba recently emphasized that ensuring the “healthy development” of cryptocurrency is “extremely important” for the nation’s economy and technological progress. His remarks came as the government confirmed plans to review the country’s contentious crypto tax framework by the end of June 2025.
The announcement, made by Finance Minister Katsunobu Kato during a plenary session of Japan’s House of Representatives, marks a significant moment for the country’s crypto sector, which has long struggled under some of the toughest tax rules in the world.
Japan’s Finance Ministry to Examine Crypto Tax Reform
Finance Minister Kato stated that Japan’s Financial Services Agency (FSA) will lead the review based on proposals from the Liberal Democratic Party (LDP) — the nation’s ruling political party.
He explained that the FSA’s study will include recommendations for “necessary legislative amendments” and that these will be coordinated with Japan’s tax authorities to ensure that any updates are implemented smoothly before the new fiscal year.
This move comes after persistent calls from lawmakers and industry leaders for Japan to modernize its outdated crypto tax system, which they argue stifles innovation and drives entrepreneurs abroad.
Prime Minister Ishiba: Crypto Can Boost Productivity and Solve Social Challenges
Prime Minister Shigeru Ishiba, who succeeded Fumio Kishida, has expressed a cautiously optimistic outlook on digital assets. Ishiba believes that cryptocurrencies and blockchain technologies can enhance Japan’s productivity and help address the country’s broader social and economic issues — from labor shortages to digital transformation.
However, Ishiba stressed that the government must prioritize user protection and foster a safer environment for investors and developers. “Cryptoassets can be beneficial,” Ishiba stated, “but their growth must be managed responsibly.”
His comments suggest a balanced approach — one that encourages technological innovation while ensuring regulatory clarity and investor security.
Redefining Cryptocurrency Under Japanese Law
One of the main focuses of the review will be the legal definition of cryptocurrencies in Japan. Currently, digital currencies like Bitcoin are categorized as “payment instruments” under Japanese law.
However, the Finance Ministry acknowledges that most crypto assets today are used primarily for investment and trading, not for everyday payments. As a result, officials are considering reclassifying crypto to better reflect its modern use cases.
According to Minister Kato, the FSA plans to evaluate multiple perspectives before finalizing its decision. Since 2017, the FSA has overseen all crypto-related legislation, from exchange licensing to anti-money laundering compliance. Historically, its policy recommendations to the Japanese parliament have been adopted with minimal resistance, highlighting the agency’s strong influence in shaping the nation’s financial framework.
A Shift from Kishida’s Approach
Former Prime Minister Fumio Kishida was known for his relatively crypto-friendly policies, supporting the expansion of Web3 technologies and blockchain innovation. However, his administration was often criticized for failing to address Japan’s complex and punitive crypto tax rules.
Under the current system, profits from cryptocurrency trading are classified as “other income” — meaning that high-earning investors can face tax rates of up to 55%.
This rate far exceeds the flat capital gains tax applied in many other countries, typically around 20%, and has driven many Japanese traders and startups to relocate to more favorable jurisdictions such as Singapore and Hong Kong.
Lawmakers and industry groups, including members of the LDP’s Web3 Digital Society Promotion Office, have repeatedly argued that this system is unfair and counterproductive, discouraging domestic innovation.
Pressure Mounts for Change
In late 2024, Akihisa Shiozaki — a leading member of the LDP and chair of the Web3 Digital Society Promotion Office — declared that reforming Japan’s crypto tax laws was an “urgent priority.”
The upcoming review by the FSA and Finance Ministry appears to be a direct response to this pressure. If implemented, the reforms could align Japan’s crypto taxation policies with global standards, making it more competitive as a hub for blockchain innovation.
Additionally, the FSA is reportedly considering amending the Payment Services Act to include cryptocurrencies under the Financial Instruments and Exchange Act (FIEA) — a move that could provide stronger investor protections and regulatory consistency.
Such a change would signal a growing consensus between the Finance Ministry and the FSA in favor of modernization and reform.
Industry Reaction and Outlook
Japan’s crypto and Web3 communities have cautiously welcomed the news. Many believe that lower taxes and clearer regulations could help revitalize Japan’s stagnant crypto industry, attract foreign startups, and encourage domestic growth in blockchain-based services.
However, analysts warn that while the government’s intentions appear positive, implementation and timing will be crucial. If reforms take too long or fail to address fundamental issues such as tax classification and reporting complexity, Japan may continue to lag behind its Asian counterparts.
Still, with both the Prime Minister and the Finance Minister publicly supporting change, the outlook for Japan’s crypto future appears more promising than it has in years.
As Ishiba put it, the government must “ensure user protection and improve the environment” for the crypto market — because healthy growth is not just important, it’s essential.
