Japanese Tax on Cryptocurrency: Up to 55% and What’s Changing in 2026

Japan used to have one of the highest cryptocurrency tax rates in the world-up to 55%. If you made money trading Bitcoin, Ethereum, or any other digital asset, the government could take more than half of your profit. That wasn’t just high-it was punishing. And it wasn’t just about the numbers. It was about how unfair the system felt to everyday investors.

Why Japan taxed crypto like income, not investment

In Japan, cryptocurrency isn’t treated as money or even as an investment like stocks. It’s classified as property. That means every time you sell Bitcoin for yen, trade Ethereum for Solana, or buy coffee with Dogecoin, you trigger a taxable event. The profit you make gets added to your annual income and taxed at the same progressive rates as your salary.

Here’s how it worked: national income tax ranged from 5% to 45%, depending on how much you earned overall. Then, on top of that, you paid a 10% local tax-4% to your prefecture and 6% to your city. Add them together, and if you were in the top income bracket, you were paying 55% on your crypto gains. No exceptions. Not even if you held Bitcoin for five years.

Compare that to stocks. In Japan, selling shares gets taxed at a flat 20%. That’s it. No matter how much you make. So if you had $100,000 in crypto profits and $100,000 in stock profits, the crypto side could cost you $55,000 in taxes. The stock side? Just $20,000. It wasn’t just a tax difference-it was a disincentive to even try crypto.

What counted as a taxable event

You didn’t pay tax just for owning crypto. You didn’t pay when you bought it with yen. You didn’t pay when you moved it between your own wallets. But the moment you did anything with it-sold, traded, spent-you owed taxes.

• Selling Bitcoin for Japanese yen? Taxable.
• Trading Ethereum for Chainlink? Taxable.
• Using Litecoin to buy a laptop? Taxable.
• Staking rewards or airdrops? Also taxable-treated as income when you received them.

The tax authorities didn’t care if you were a casual trader or a full-time market maker. If you made a profit, it was miscellaneous income. No distinction. No leniency. Even if you held for ten years, you still paid the same top rate as someone who bought and sold in a single day.

Who got hit the hardest

It wasn’t just small traders. People with crypto gains between 10 million and 50 million yen (roughly $65,000 to $325,000) were getting slapped with 47% to 52% tax rates. That’s not a typo. For many, it meant paying more in taxes than they’d made on their first few trades.

Reddit threads in r/CryptoJapan were full of stories: traders quitting because the math didn’t add up. People moving their wallets offshore to avoid reporting. Some even stopped trading entirely. According to the Japan Times, domestic crypto trading volume dropped 32% in 2023 compared to the year before. Chainalysis found that 27% fewer Japanese wallet addresses were active on local exchanges between 2022 and 2023.

It wasn’t just about the money. It was about the paperwork. You had to track every single transaction-every buy, every sell, every swap-across every exchange and wallet you used. If you used Binance, Coincheck, and BitFlyer, you had to export data from all three, match them up, calculate cost basis, and file it all by March 15. Most people couldn’t do it alone. Freee, a Japanese tax software company, said 68% of their crypto users needed professional help just to file in 2023.

The rise of crypto tax software

With no official tools from the government, people turned to third-party platforms. Koinly, CoinTracker, and other crypto tax calculators saw a 210% surge in Japanese users between 2022 and 2023. People were spending hours, sometimes hundreds of dollars, just to get their taxes right.

The Tokyo Blockchain Association even published a Japan Crypto Tax Handbook in March 2024. It had real examples: how to report DeFi earnings, how to handle hard forks, how to calculate gains when you swap tokens across multiple wallets. It wasn’t just helpful-it was necessary.

Why Japan is finally changing

Japan used to be a leader in crypto regulation. It was one of the first countries to license exchanges. It had strict KYC rules. It was a founding member of the FATF. But by 2024, it was falling behind.

The market had shrunk. Japan’s crypto market cap dropped from 8.2% of the global total in 2021 to just 3.7% in 2024. Meanwhile, South Korea, Singapore, and the UAE were luring traders with lower taxes and clearer rules. Japan’s Financial Services Agency admitted it was losing talent and capital.

Then, in December 2023, Japan’s ruling party announced a plan: scrap the progressive tax and replace it with a flat 20% rate-same as stocks. By 2026, the 55% nightmare would be gone.

What the 2026 reform actually means

The new system isn’t perfect, but it’s a massive improvement.

• Flat 20% tax on all crypto gains-no matter how long you held.
• No more mixing crypto income with your salary.
• Same rate as stocks. Fairer. Simpler.
• Still must report gains over 200,000 yen.
• Still need to keep records for seven years.
• Three-year loss carry-forward allowed-so if you lose money one year, you can offset it against future gains.

It’s not like the U.S., where holding for over a year cuts your rate to 15% or even 0%. Japan still doesn’t reward long-term holding. But it’s no longer punishing it.

Who benefits the most

The biggest winners are the people who were getting crushed under the old system. Traders with gains between 5 million and 50 million yen will see their tax bills drop by 50% or more. A person making 20 million yen in crypto profits used to pay about 9.5 million yen in taxes. Under the new rules? Just 4 million.

Exchanges will benefit too. With lower taxes, more people will trade locally. Nomura Research Institute predicts Japan’s crypto market could grow 45-60% in three years after the reform. That’s 1.2 to 1.8 million new retail investors-and billions in institutional money flowing back in.

What stays the same

Even with the tax cut, Japan isn’t going soft on compliance.

• All exchanges must still be registered as Crypto-Asset Exchange Service Providers (CAESPs).
• KYC is still mandatory.
• Transaction data is still shared with tax authorities.
• You still need to file between February 16 and March 15.
• The 200,000 yen reporting threshold stays.

Japan isn’t becoming a tax haven. It’s becoming a fairer, more competitive one.

What’s next

The reform is expected to pass in mid-2025. By April 2026, the new 20% rate will be in effect. For most people, it’ll feel like a relief. But the real test comes after: will Japan keep its edge in innovation?

Some experts, like Dr. Hiroki Takeuchi from the University of Tokyo, worry that not differentiating between short-term and long-term trades might still discourage serious, long-term investors. Others say it’s better than the old system-and that’s enough for now.

One thing’s clear: Japan’s crypto scene isn’t dead. It’s just been waiting for the tax code to catch up. And in 2026, it finally will.