For the first time, the Liberal Democratic Party's outline addresses this, marking a critical breakthrough for the industry.
The Liberal Democratic Party and Komeito's Taxation Investigation Committee recently finalized the 2025 fiscal year (Reiwa Year 7) tax reform outline, which has attracted significant market attention regarding the taxation methods for virtual assets. For the first time, the outline clearly states that it will consider reviewing the tax system for virtual currencies and attempting to position their important role in the formation of national assets.
It was also mentioned that to achieve a separate taxation system for reporting similar to financial products like stocks, corresponding laws must first be established, investor protection strengthened, and tax reporting obligations for trading operators improved. This not only represents an unprecedented open attitude from the Japanese authorities towards the cryptocurrency market, but it may also pave the way for subsequent tax rate adjustments and loss offsetting systems.
Source: Junichi Kanda, Liberal Democratic Party Tax Investigation Committee General Meeting.
For a long time, Japanese cryptocurrency investors have expressed dissatisfaction with issues such as a capital gains tax rate as high as 55%; they have also suffered from the inability to offset losses across fiscal years, leading to the outflow of many projects and talents to more favorable environments abroad. In recent years, while the Web3 industry has been rapidly developing, it has faced the predicament of overly strict domestic regulations. Now, the new version of the tax reform outline finally clearly states the intention to 'review cryptocurrency taxation', which is seen as a significant advancement after years of effort.
The threshold remains high, and the Financial Services Agency is fully cooperating.
According to reports from Japanese media (CoinPost), the first generation digital minister of the Liberal Democratic Party, Takuya Hirai, personally visited the Financial Services Agency to present an 'urgent proposal for virtual assets' to Minister of Finance Kato Katsunobu, emphasizing the following key points:
Change the taxation of cryptocurrency trading profits to a separate taxation system.
Establish a clearer regulatory and regulatory framework.
Strengthen investment in cybersecurity, so that virtual currencies can truly serve the national economy.
Member Hirai stated that Minister Kato generally expressed agreement with this plan, which is expected to promote the implementation of specific system designs. Furthermore, the outline also requires 'preparation of laws before tax adjustments', meaning that the Financial Services Agency, the National Tax Agency, and trading operators need to cooperate in establishing clear regulations to allow trading information to be reported more transparently to tax authorities, facilitating the actual implementation of 'separate taxation'. At the same time, stricter controls will be put in place regarding investor protection and the transparency of capital flows.
Source: X The first generation digital minister of the Liberal Democratic Party, Takuya Hirai, personally visited the Financial Services Agency to present an 'urgent proposal for virtual assets' to Minister of Finance Kato Katsunobu.
Tax reform schedule and scope: Investors are watching closely.
In fact, this outline only mentions the 'under review' stage and does not guarantee that significant adjustments to the tax law will be completed by the 2025 fiscal year. However, before the outline was finalized, the issue of virtual assets had been excluded several times from annual tax reform items, raising concerns about the potential delay in reform. Therefore, being 'formally included in the outline' is seen as a key step forward. If the legislative process goes smoothly, possible future reforms include:
Report separate taxation, with the expected tax rate potentially dropping to around 20%.
Cross-year offsetting of investment losses.
During the cryptocurrency trading process, the currency exchange phase will no longer be taxed immediately.
Once these reforms are completed on schedule, they will undoubtedly be a great encouragement for startups and investors in Japan looking to make significant strides in the Web3 and blockchain industries. At the same time, Japan can retain and attract advanced technology and capital, avoiding the continuous absorption of regional competitiveness by overseas markets.
Will the income threshold also be slightly adjusted? The goal is to stimulate the economy.
It is worth mentioning that this outline also mentioned adjusting the income threshold of 1.03 million yen 'tax wall' to an expected 1.23 million yen, and promised to include the 'target of 1.78 million yen' in next year's further review scope. National Democratic Party representative Yuichiro Tamaki argued that 1.23 million yen is still insufficient and called for further increases to reduce the burden on families. However, from an overall perspective, the Japanese government has shown its determination to strengthen support for emerging industries and encourage labor participation and investment willingness.
Overall, the announcement of the 2025 fiscal year tax reform outline marks a significant turning point for Japan's cryptocurrency tax policy. Although there are still challenges regarding policy details and the legislative process ahead, the long-standing calls for tax reform that have repeatedly failed in the past have now received formal acknowledgment for the first time, indicating that both the market and the government recognize the potential value of cryptocurrencies for the economy and innovation. Japanese investors and operators will closely monitor whether subsequent discussions can smoothly pass through the National Diet, laying a healthier legal foundation for the future development of the Web3 industry and international competition.
Further reading.
Fireblocks sets up in Tokyo, optimistic about tax reform and technological innovation, will Japan become an industry leader?
Japan's cryptocurrency tax reform faces questioning from Shigeru Ishiba! The opposition angrily asks: What happened to the promised Web3 national strategy?
Japan warns unregistered exchanges! Four popular platforms have all been listed, but why is there no effect?
[Disclaimer] The market has risks; investment should be cautious. This article does not constitute investment advice, and users should consider whether any opinions, viewpoints, or conclusions in this article align with their specific circumstances. Investing based on this is at your own risk.
'Japan releases signals for Web3 development, cryptocurrency tax reform included in the reform outline, the industry welcomes a new opportunity!' This article was first published in 'Crypto City'.