As of September 27, 2024, Liberal Democratic Party member Shigeru Ishiba has been selected as Japan's next prime minister. However, Ishiba is a former defense minister and is keen on taxing and printing money, which may cause trouble for the country's cryptocurrency enthusiasts.
Shigeru Ishiba is a Christian, a military expansionist and a banker. The resume of incoming Japanese Prime Minister Shigeru Ishiba is very different from what many expected of the Shinto-Buddhist and constitutional pacifist. The LDP politician and former defense minister will take over the leadership of Japanese politics from Fumio Kishida on October 1 after a September 27 vote.
What are Ishiba's overall goals? Raise taxes on investment and income, and strengthen the military.
Ishiba’s plans are indicative of ongoing turmoil in Japan’s cryptocurrency scene. Tokyo, and Japan as a whole, presents a curious contrast when it comes to cryptocurrencies. The original vision of Bitcoin’s (ostensibly) anonymous creator, Satoshi Nakamoto, for peer-to-peer electronic cash that could be used freely without going through a bank remains alive and well among trading groups, local businesses and meetups. But on the regulatory front, Japan’s government has been controversial in recent years, imposing hefty taxes on crypto assets and banning exchanges from using privacy coins. Still, 2024 is said to be the year that cryptocurrency trading volumes on centralized exchanges have grown significantly.
With former Prime Minister Fumio Kishida set to step down soon, what does this mean for a Shigeru Ishiba-led government? First, higher tax rates on income and cryptocurrency investments. Ishiba has said he wants to tighten income and investment taxes, but exempt those who invest through state-approved programs, such as the Japan Individual Savings Account (NISA), a limited tax-free investment program for approved assets, but which currently excludes cryptocurrencies (aside from approved ETF investments). “I have absolutely no intention of raising taxes on those who increase their income through the new National Security Law,” Ishiba noted.
However, in line with the world’s dominant American-style economic model, the new prime minister wants to increase defense spending, raise Japan’s minimum wage, and escape deflation. In the most literal terms, this means the yen printers will be revved up. While fiat currency failures, heavy taxes, and devaluations were once widely seen as a boon for cryptocurrency users as a hedge against such events, greater market concentration and the abandonment of the P2P ethos are worrying mainstream holders. One Japanese X user questioned: “If Shigeru Ishiba becomes prime minister, will the discussion of cryptocurrency tax cuts continue?
Other users of the social media platform seemed hopeful about the so-called crypto-friendly Ishibazu government. The Nikkei index fell sharply after the election.
Militarist Shigeru Ishiba has a dim view on Bitcoin and bland advice for the Bank of Japan. Unlike his predecessor Kishida, Ishiba has yet to publicly endorse cryptocurrencies at major tech conferences, instead apparently focusing more on traditional economic and defense-related matters.
The former banker and Tottori politician has publicly called for the harshest possible punishment for military defectors or draft dodgers (assuming Japan ever reinstates conscription, a position he supports). He has also voiced strong support for an Asian version of NATO and for revising the pacifist section of Japan's constitution, citing apparent missile attacks and threats from North Korea. Ishiba is also known for facilitating Japan's first deployment of troops to Iraq in 2003 without UN Security Council authorization.
While rampant militarism and expansionist arms policies may seem unrelated to cryptocurrencies on the surface, greater alignment with the US war machine and links to Middle Eastern conflicts involving Israel could have a huge impact on the market. Not to mention the potential for a larger crackdown on cryptocurrencies in Japan, as notorious groups like North Korea’s “Lazarus Group” will become increasingly prominent scapegoats under Ishiba’s watch, which amounts to stricter Know Your Customer (KYC) policies for regular exchange users. When it comes to fiscal policy, however, Ishiba’s stance is less clear.
Of course, some Japanese investors are relieved that their more fiscally liberal opponent did not enter the White House, but Ishiba still supports the Bank of Japan's "loose" monetary policy and may support the Bank of Japan's recent tough measures to combat inflation. For Japanese residents who are looking forward to decisive changes in the economy, this can be said to be a "nothing to gain". Especially considering the current inflation dilemma and the plight of the yen.
For those still interested in Satoshi’s value proposition of cash over politics and banks, the sun sets and rises again, and it’s business as usual.
The article is for reference only and does not constitute investment advice.
