For years, if you traded cryptocurrency in Japan, you could be hit with a tax bill of up to 55%. That’s not a typo. It’s higher than the top income tax rate in the U.S. and more than double what you’d pay on stocks in Japan. This wasn’t a glitch - it was the law. And it pushed thousands of traders to quit, move abroad, or stop reporting entirely.
Why Japan taxed crypto like a bonus paycheck
Japan didn’t treat crypto as money. It treated it like a side hustle. Under the Payment Services Act, any profit from selling, trading, or spending Bitcoin or Ethereum was classified as miscellaneous income. That meant it got slapped with the same progressive tax rates as your freelance gig or part-time job - not like stocks, which are taxed at a flat 20%. Here’s how it broke down: national income tax ranged from 5% to 45%, depending on how much you earned overall. Then came the local taxes - 10% more, split between your prefecture and city. Add them together, and if you made over 9 million JPY ($58,000 USD) in crypto gains, your total tax hit 55%. No exceptions. No discounts for holding Bitcoin for five years. If you bought it yesterday and sold it today, you paid the same rate as someone who held it for a decade.What triggered the tax
You didn’t pay tax when you bought crypto. You didn’t pay when you held it. You didn’t even pay when you moved it from one wallet to another. But the moment you did anything with it - sold it for yen, traded it for another coin, or bought coffee with Bitcoin - the tax man came knocking. That’s not how most people think about money. If you sell your car or your old laptop, you don’t pay income tax on the profit. But in Japan, selling your Bitcoin was treated like earning a bonus. And if you earned 10 million JPY in crypto gains, you didn’t just pay 55% on that 10 million - you paid 55% on the entire amount because it got added to your other income. So if you made 8 million yen as a salary and 2 million in crypto, your total income was 10 million, pushing you into the highest tax bracket.How it hurt real people
The numbers tell the story. Between 2022 and 2023, the number of active Japanese crypto wallets dropped by 27%. Trading volume on domestic exchanges fell 32% year-over-year. Reddit threads from r/CryptoJapan were full of posts like: “I made 20 million JPY in gains. After tax, I’m left with 9 million. I could’ve made more just buying stocks.” One trader in Osaka told the Japan Times he had to sell half his Bitcoin holdings just to cover the tax bill. Another said he closed his account and moved to Portugal, where crypto gains are tax-free. Even exchanges struggled. CoinCheck, Japan’s biggest platform, reported that 68% of users needed professional help just to file their taxes. Freee, a popular accounting software, saw a 210% spike in Japanese users trying to track crypto transactions in 2023. The system didn’t just punish investors - it made compliance a nightmare. You had to track every single trade across every exchange, every wallet, every DeFi swap. Cost basis calculations became a full-time job. That’s why crypto tax tools like Koinly exploded in popularity. Japanese users made up nearly 15% of their global customer base by late 2023.
Why Japan finally changed its mind
By 2024, Japan’s crypto market was shrinking. It had fallen from 8.2% of the global market in 2021 to just 3.7%. Meanwhile, South Korea and Singapore were growing fast, offering lower taxes and clearer rules. Japan’s Financial Services Agency admitted the problem: “The current tax structure has contributed to an outflow of talent and capital.” The turning point came in December 2023. Japan’s ruling Liberal Democratic Party announced plans to replace the 55% system with a flat 20% tax on crypto gains - the same rate applied to stocks. The change was part of a broader push to make Japan a “global hub for digital assets.” By April 2025, the FSA had published a formal discussion paper laying out the roadmap. Finance Minister Katsunobu Kato confirmed the reform would be finalized by June 2025. The new rules, set to take effect in April 2026, will:- Apply a flat 20% tax on all crypto gains (no more progressive brackets)
- Keep the 200,000 JPY reporting threshold
- Allow losses to be carried forward for up to three years
- Maintain mandatory exchange reporting and KYC
What’s still the same
Don’t think this is a free pass. The tax reform didn’t erase oversight. Exchanges still have to report your trades to the tax office. You still have to file between February 16 and March 15 every year. You still need to track every transaction. The government isn’t going soft on compliance - it’s just making the tax fairer. And while the 20% rate sounds like a win, it’s not perfect. Unlike the U.S., Japan won’t distinguish between short-term and long-term holdings. So if you bought Ethereum last week and sold it this week, you pay 20%. If you held it for five years? Still 20%. That means Japan still misses out on encouraging long-term investment - a strategy that’s worked in places like Germany and Switzerland.
Comments (1)