Japan’s 2026 Tax Reform on Taxation of Crypto Asset Transactions and Its Implications for Foreign In

Japan’s 2026 Tax Reform on Taxation of Crypto Asset Transactions and Its Implications for Foreign Investors

Introduction

Under the current Japanese tax framework, income derived from crypto asset transactions is generally not treated as capital gains, but, classified either as business income or miscellaneous income. As a consequence, such income is subject to income tax in Japan at progressive rates, with a combined national and local maximum rate of 55.945%.

This heavy tax burden compared to other developed countries has long been regarded as a major obstacle to crypto-related investment activities in Japan.It is also an important consideration for foreign individuals holding significant volume of crypto assets when contemplating relocation to Japan or engaging in trading activities of crypto assets connected to the Japanese market.

The Outline of 2026 Tax Reform released last December by the ruling parties and government indicates a substantial shift in the policy of crypto related taxation. The reform contemplates the introduction of a fixed-rate separate taxation regime applicable to certain crypto asset transactions. Given the potential impact of this development on foreign investors with ties to Japan, it is important to consider both the scope of the proposed regime and its implications to foreign investors. Please note, however, that, at the time of writing, since the legislative wording related to the new regime has not been fully published, the precise scope of the regime has not yet been fully clarified.

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Author: Tsutomu Endo