Japan backs crypto tax cut to 20% as lower house advances reform

Japan’s lower house has moved to reclassify crypto and slash the top tax rate on digital assets from 55% to 20%, a shift that would put token gains on closer footing with equities if it survives the rest of the legislative process.

The vote matters because Japan has long been one of the harshest major markets for crypto taxation. Under the current rules, profits can be taxed as miscellaneous income, which means high earners can face a combined levy that bites far harder than the flat capital gains treatment used for stocks. For traders, that has been more than a policy nuisance. It has shaped where liquidity forms, how aggressively local desks deploy capital, and how willing founders are to keep treasury operations onshore.

What the lower house actually did was advance a reclassification plan. What it did not do was make the change law immediately. The proposal still has to clear the upper house and pass the remaining steps before the new tax treatment becomes binding. Until then, Japan’s current regime stays in place.

Still, the direction is hard to miss. A 20% rate would narrow the gap between Japan and other developed markets, and that could matter for more than domestic retail traders. Lower tax friction tends to improve turnover, reduce the incentive to route activity offshore, and make it easier for exchanges and market makers to justify deeper local order books. It can also make Japan look less like a regulatory outlier at a time when several jurisdictions are trying to court crypto businesses rather than push them away.

The policy shift also fits a broader pattern in Tokyo. Japanese authorities have been under pressure to keep pace with the growth of digital assets while preserving tax revenue and investor protections. A cleaner tax regime is not a full green light, but it removes one of the biggest practical obstacles to broader participation.

For now, the key watch item is the upper house vote and the final language of the reform. If lawmakers keep the 20% rate intact, Japan could quickly become a more competitive venue for crypto trading and listings, even if the broader regulatory framework remains cautious.