Japan to ease crypto taxation under new stimulus package

Japan is advancing a landmark economic stimulus package that includes a significant overhaul of current taxation rules for crypto, local media reported on Nov. 20.

Prime Minister Shigeru Ishiba has pledged bipartisan cooperation to pass sweeping reforms aimed at easing the financial burden on crypto investors and strengthening the country’s position as a leader in digital asset innovation.

The proposed changes would replace Japan’s variable “miscellaneous income” tax on crypto, which can reach up to 55%, with a flat 20% rate.

The move seeks to align digital asset taxation with that of traditional investment income, simplifying tax compliance for crypto traders and fostering a more investment-friendly environment.

The revisions are part of broader tax reform measures within the stimulus package, which also propose raising the income tax exemption threshold and cutting taxes on fuel and sales to boost consumer spending.

The reforms are expected to take effect by 2025, pending parliamentary approval.

Crypto policy gaining momentum

Japan has been a key player in the global crypto market as one of the first countries to implement a comprehensive and stringent regulatory framework for digital assets. The country has since continued to take a progressive approach toward the industry.

However, the high tax rates on crypto have been criticized for stifling innovation and driving talent and capital to more favorable jurisdictions. Industry stakeholders have advocated for the reforms, arguing that clearer, more balanced policies are essential for Japan to compete in the rapidly evolving blockchain and web3 sectors.

Prime Minister Ishiba’s administration appears to have taken these concerns seriously, viewing crypto reform as a strategic priority. The tax changes are expected to encourage broader adoption of digital assets and attract more blockchain-focused businesses to the country.

This policy shift also aligns with the growing political consensus on the importance of digital finance and crypto. During his recent campaign, Democratic Party for the People leader Yuichiro Tamaki, a strong advocate for Web3 innovation, similarly highlighted the need for reform.

While Tamaki’s party remains in opposition, his proposals reflect a broader movement to position Japan as a leader in the digital economy.

Stimulus

The crypto tax reform is part of a broader economic package aimed at revitalizing Japan’s sluggish economy while addressing rising public debt and inflationary pressures.

Other proposed measures include raising the tax-free income threshold from $6,650 to $11,345, cutting fuel taxes, and reducing sales taxes to support consumer spending. The government also plans to target employment recovery, setting a benchmark of a 2% improvement in job market metrics.

The stimulus package reflects Japan’s precarious economic position, described by some analysts as being “stuck between a rock and a hard place.” The country faces mounting public debt, aging demographics, and global economic headwinds, including rising inflation and geopolitical uncertainty.

Critics have argued that while the stimulus measures may provide short-term relief, structural reforms are necessary to address Japan’s long-term economic challenges.