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As Japan prepares its FY2026 tax reforms, lawmakers have drafted a crypto tax overhaul. The plan would replace progressive taxation, which can exceed 50% for high earners. The proposal still needs legislative approval and approval by the National Diet.
The draft links lower taxes to stricter oversight. It signals a shift toward treating regulated crypto assets like stocks and funds.
Japan’s ruling coalition released the FY2026 tax reform proposals on December 19, 2025. The document sets out “separate taxation” of 20.315% for qualifying crypto transfers. That figure combines national income tax, a surtax, and local inhabitant tax.
The blueprint also sets an “Application Start Date.” Lawmakers would start the new tax on January 1 after the amended FIEA takes effect. Consequently, the final start year depends on when the Diet passes the implementing laws.
Japan currently taxes most crypto profits as miscellaneous income. That classification pushes larger gains into higher marginal brackets. Under the draft, eligible gains would move into a separate category that mirrors securities taxation.
The draft does not extend the flat rate to every token. It targets “Specified Crypto Assets” that appear in the Registry of Financial Instruments Business Operators. A resident would also need to transfer those assets to a counterparty that runs a crypto asset trading business.
However, the scope leaves gaps. Unregistered tokens and trades outside registered businesses may remain under current tax rules. That includes some peer-to-peer activity, unless lawmakers expand definitions in later bills.
Reports have pointed to Bitcoin and Ether as likely candidates. Officials have not published an eligibility list. Registered intermediaries would route qualifying trades through the new framework.
The proposal introduces loss relief for qualifying trades. Investors could carry forward losses from specified crypto asset transfers for three years. They could then offset gains from other Specified Crypto Asset transfers, under stated conditions.
Additionally, the blueprint points to a product set. It calls for “necessary measures” to apply separate taxation to crypto derivatives and crypto-related ETFs. That language suggests the government wants consistent treatment across regulated market products.
Regulators also continue work on legal classification. Japan’s Financial Services Agency plans to revise the FIEA to treat crypto as a financial product. A December 2025 draft report also described securities-style rules for crypto assets used as investments.
Some draft summaries do not explicitly address NFTs, staking rewards, or lending yields. Those income streams may stay under miscellaneous income rules. Lawmakers would need to set definitions in implementing bills. The Diet would review the package during the FY2026 budget debate in 2026.
The FY2026 blueprint keeps several consumption tax rules unchanged. It continues the exemption for crypto transfers and extends it to crypto asset lending. It also retains a 5% deemed consideration rule for taxable sales ratio calculations.
