Japan moves to apply flat 20% tax on digital currency profits

Japan is preparing to introduce a significant reduction to the country’s maximum tax rate on digital asset profits by imposing a flat 20% tax on gains from digital asset trading, according to a report from local news outlet Nikkei.

Under Japan’s current tax law, digital asset trading is included as part of the income tax for individuals and businesses. Retail traders in Japan currently face progressive taxation, which can reach up to 55% for high-income digital asset earners.

According to the Nikkei report, the planned overhaul would make this a flat 20%, aligning it with the taxation of equities and investment trusts (stocks). The change is expected to be included in the 2026 tax reform package, which is scheduled to be finalized at the end of this month.

The policy shift represents another step towards the normalization of digital assets in Japan, with the country among a host of jurisdictions that have signaled in recent years an intention to make itself a digital currency hub.

With this aim in mind, a less onerous tax on digital assets removes an off-putting barrier to investment, in a country that has already seen a significant growth in digital currency interest over the past few years.

In October, a report from IFC Review—an online resource for wealth management professionals—stated that the total number of digital asset accounts registered in Japan exceeded 12 million in February 2025, representing a 3.5-fold increase in five years.

This backed up a September report from blockchain analytics firm Chainalysis, which placed Japan 19th in the world in terms of ‘crypto adoption,’ while noting the Asia-Pacific region as the fastest-growing in adoption.

Japan’s proposed change to digital asset taxation was first floated last month by the country’s top financial regulator, the Financial Services Agency (FSA), as part of a range of new measures aimed at the digital asset sector. This included a plan to introduce regulations banning insider trading of digital assets, and new rules that would require digital asset exchanges in the country to maintain liability reserves to protect customers against losses resulting from hacks and security breaches.

Watch | Tech of Tomorrow: Diving into the impact of tech in shaping the future