Japan Backs Flat 20% Crypto Tax to Boost Trading and Liquidity
Japan’s government and ruling coalition have formally endorsed a proposal to tax crypto gains at a flat 20%, moving digital-asset profits toward the same regime as equities and investment trusts. The Financial Services Agency (FSA) plans to submit a bill in the regular Diet session in early 2026. The change would replace the current treatment of crypto as “miscellaneous income” taxed under progressive brackets, which often produced much higher effective rates and discouraged domestic trading, liquidity and Web3 business formation. Industry groups, including the Japan Blockchain Association, lobbied for the 20% rate for years; domestic brokerages estimate spot trading participation could rise 20–30% within two years if the reform passes. Officials present the shift as the most consequential Japanese crypto-policy change since the Mt. Gox collapse, intended to reduce tax-driven capital flight and revive a stagnating sector. Key implementation details — treatment of losses and offsets, reporting rules, thresholds and whether the rate applies identically to individuals and corporations — remain to be decided during legislative drafting. Traders should monitor the bill’s wording, the effective date, loss-offset rules and any reporting thresholds, as these will materially affect after-tax returns, trading strategies and onshore liquidity.
Bullish
A move to a flat 20% tax on crypto gains is likely bullish for onshore trading volumes and market liquidity. Under the current ‘miscellaneous income’ progressive system, many retail traders faced higher effective tax rates that discouraged trading and encouraged capital flight. Aligning crypto with equities and investment trusts reduces tax uncertainty and lowers potential after-tax rates for higher-income traders, likely increasing spot trading participation and attracting institutional interest over time. Short-term price impact may be muted until the bill’s wording and effective date are clear; uncertainty around loss-offset rules and reporting thresholds could limit immediate market response. Over the medium to long term, clearer and lower tax treatment should support higher domestic turnover, narrower spreads and greater onshore custody and product development, which are constructive for crypto asset prices in Japan’s market. Traders should watch legislative timing, loss-offset provisions and whether corporations get the same rate — those specifics will determine the magnitude and timing of the bullish effect.