Original | Odaily Planet Daily ( @OdailyChina )

By Wenser ( @wenser 2010 )

At the recently concluded WebX event in Japan, Katayama Satsuki (real name: Katayama Satsuki), a member of the House of Councillors and Chairperson of the Budget Committee of the Liberal Democratic Party (LDP), stated that Japan is currently exploring the reclassification of cryptocurrencies themselves, specifically redefining well-known crypto investment assets like BTC and ETH. Japan's current tax rate on crypto assets is as high as 55%, but if crypto assets were transferred from the Payment Services Act to the Financial Instruments and Exchange Act, the tax rate could be reduced to 20%, in line with the stock tax rate. She also stated, "This reform is expected to be implemented within one to two years, and we expect it to take effect soon. The direction of this reform has been decided by the Cabinet, which usually means a strong push forward. However, since the LDP has lost its parliamentary majority, we will need to negotiate with other political parties. This will take time and complicate the process, but several parties share our views and we are willing to wait and see how things develop. A final conclusion must be reached before December."

Odaily Planet Daily will analyze this in detail in this article to explore whether this tax rate reform can bring more variables to the crypto market.

Crypto tax rates must change: the economic dilemma under "new capitalism"

A closer look at the cryptocurrency tax reform initiated by the Financial Services Agency of Japan and driven by the Liberal Democratic Party reveals that its main incentive lies in Japan's current somewhat poor economic environment.

Data released by Japan's Ministry of Health, Labor and Welfare in early July showed that real wages, adjusted for inflation, fell 2.9% year-on-year in May, a further increase from the revised 2.0% drop in April and the largest drop since September 2023. Furthermore, the Consumer Price Index (CPI), used by the Ministry of Health, Labor and Welfare to calculate real wages (covering fresh food prices but excluding rent costs), climbed 4.0% year-on-year in May, a surge significantly exceeding nominal wage growth. Rice prices in Japan soared 101.7% year-on-year in May, the largest increase in more than half a century.

Soaring prices, combined with previous cabinet gaffes and the commodity voucher scandal, have undermined the ruling Liberal Democratic Party's credibility. On July 21st, vote counting for the 27th House of Councillors election in Japan was completed. The ruling coalition, comprised of the LDP and Komeito, secured a combined 47 seats, falling short of the 50-seat majority required to maintain a majority in the upper house. Furthermore, having previously failed to secure a majority in the House of Representatives, the ruling coalition officially became a minority government in both houses. This marks the first time since the LDP's founding in 1955 that a ruling coalition led by the LDP has lost a majority in both houses.

Furthermore, the Japan-US tariff negotiations are also weighing on the pulse of the Japanese economy, influencing changes and developments in both domestic and international economic situations. Japan today faces a predicament of both internal and external difficulties. Consequently, the Japanese government is forced to seek new solutions under the "New Capitalism" approach. Specifically, the Japanese government is making the following two efforts:

On the one hand, raising the minimum wage will open up new sources of income for the public. In early August, the Central Minimum Wage Council of Japan's Ministry of Health, Labor and Welfare decided to raise the national weighted average minimum wage guideline for 2025 to 1,118 yen (approximately RMB 54.60) per hour. This is a 63 yen increase, or 6%, from the current 1,055 yen. This is the largest increase since the implementation of the hourly wage system in 2002. This marks the 23rd consecutive year of minimum wage increases in Japan. If implemented, the hourly wage in all prefectures will exceed 1,000 yen for the first time.

Another approach is to reduce public spending by lowering taxes. Currently, this step is limited by party disputes and is still in its early stages. The Liberal Democratic Party has long been committed to promoting the reclassification of crypto assets and lowering tax rates to promote Japan's position as a hub for the development of the Web 3 industry. However, opposition parties such as the Constitutional Democratic Party and the Democratic Progressive Party have also made similar policy promises during elections (such as the NFT and Web 3 measures proposed by Democratic Progressive Party leader Yuichiro Tamaki). As a result, after becoming a minority government, the LDP's tax reform efforts have inevitably been delayed to avoid criticism of "tax cuts for the rich." This is why cryptocurrency tax reform is seen as a new breakthrough, namely, to transform cryptocurrencies from "means of payment" regulated by the Payment Services Act to "financial products" under the Financial Instruments and Exchange Act.

As a result, cryptocurrency gains will be reduced from a progressive tax system of up to 55% (45% income tax + 10% inhabitants tax) under the category of “miscellaneous income” (excluding local taxes) to a flat 20% tax, the same as stocks and bonds.

Japan's two-step tax reform strategy: first, revise the tax law, then upgrade supervision

It is worth mentioning that Japan’s tax reform is not something that can be achieved overnight. In addition, crypto assets involve cross-revisions of the Payment Services Act (PSA) and the Financial Instruments and Exchange Act (FIEA), which makes the cycle more complicated. It is also affected by the review of the Financial Services Agency (FSA) of Japan and parliamentary politics.

At present, Japan's tax reform will be carried out in two steps:

The first step is to revise the tax law, that is, to adjust cryptocurrencies from the "comprehensive taxation" category to the "separate taxation" category, the same as stocks, and reduce the tax rate to around 20% (15% income tax + 5.015% resident tax + reconstruction special tax).

The second step is to upgrade regulation, that is, to reclassify cryptocurrencies as financial products through legal amendments, enabling the Financial Services Agency to apply insider trading rules, information disclosure standards and investor protection measures under the Financial Instruments and Exchange Act.

Behind the Crypto Tax Reform: Crypto ETFs and Japanese Yen Stablecoins Are Ready to Go

Notably, these reforms are also seen as a step by Japanese regulators to pave the way for the launch of cryptocurrency ETFs and yen-denominated stablecoins. The current sluggish development of cryptocurrency in Japan is undoubtedly due to security incidents such as the Mt. Gox Bitcoin theft; high tax rates have also, to a certain extent, limited trading activity in the cryptocurrency industry.

According to statistics from Shiraishi, vice chairman of the Japan Cryptocurrency Business Association, against the backdrop of the global cryptocurrency market expanding from US$872 billion to US$2.66 trillion, Japan's domestic trading volume has only increased from US$66.6 billion in 2022 to an estimated US$133 billion this year, with a growth rate of only about double.

Meanwhile, a survey conducted by the Cornell Bitcoin Club showed that 88% of Japanese residents have never owned Bitcoin; but a survey jointly conducted by Nomura Holdings and Laser Digital showed that 54% of Japanese institutional investors plan to invest in crypto assets within three years.

Based on the above information, crypto tax reform, the launch of crypto ETFs, and the introduction of Japanese yen stablecoins are imminent. According to media reports , JPYC, the first Japanese yen stablecoin approved by Japan's Financial Services Agency, is issued by a Tokyo-based fintech company of the same name. The company plans to issue 1 trillion yen (approximately $6.78 billion) worth of stablecoins within three years. This stablecoin will be backed by highly liquid assets such as deposits and government bonds, with potential applications including international remittances, corporate payments, and DeFi. Mitsubishi UFJ Financial Group (SMBC), Japan's second-largest bank, also previously announced plans to launch a stablecoin in partnership with Ava Labs and Fireblocks.

Emerging industries such as cryptocurrency are seen as a "lifeline" for Japan's social development.

The Japanese government's emphasis on the cryptocurrency industry stems from its recognition of the potential for growth in emerging sectors, particularly those represented by it. At the WebX 2025 conference in Tokyo, Japanese Prime Minister Shigeru Ishiba stated that , amidst heightened geopolitical uncertainty, the power of emerging industries is crucial for exploring new paths for economic growth. The Japanese government will continue to optimize the environment for emerging industries, promoting the development of digital, semiconductor, AI, and space industries, including Web 3, through investment support and regulatory reforms.

Shigeru Ishiba also noted that the fundamental cause of Japan's population decline lies in the over-concentration of population in Tokyo, which has led to declining marriage and birth rates, creating a vicious cycle. At this historical juncture, the government hopes to leverage the potential of new technologies like Web 3 to revitalize Japanese society. Web 3 technology can contribute to the various reforms promoted by the government. Through the innovative application of digital technology, it can not only enhance industrial competitiveness but also provide new solutions to social issues such as local development and demographic changes.

Conclusion: When will the tax rate reform begin and when will it be implemented?

Based on Japan's legal cycle, tax reform typically follows an annual cadence: an outline for the tax reform is released each December, submitted to the Diet for review in March or April of the following year, passed around June, and effective in April of the following year. This cryptocurrency tax reform is somewhat more urgent, so a specific proposal is expected before the end of the year, with legislative action likely in early 2026.

As for formal implementation, it may not take until June 2026 or even the latter half of the year. Key figures promoting this bill include Masaaki Taira and Katsunobu Kato of the Liberal Democratic Party's Web 3 Project Team (Web 3 PT); Noriyuki Hirosue, Chairman of the JCBA and CEO of Bitbank; and Katayama Satsuki, the aforementioned LDP Senate member and Chairperson of the Budget Committee.

By then, the market is expected to usher in a new round of buying.