Japan’s snap election coincides with proposed cryptocurrency reforms that include a significant planned tax reduction. Campaigning for all 465 seats in the House of Representatives began on January 27. Japan has recorded inflation above 2% for 45 consecutive months, carries public debt exceeding twice its GDP, and the proposal would reduce a current 55% crypto tax to 20% by 2028.
Under current rules, cryptocurrency gains in Japan are treated as miscellaneous income and can be taxed at rates up to 55% with no allowance to offset losses against gains. The proposed reform would replace that treatment with a 20% flat tax on crypto gains by 2028 and move those assets into a different tax category. The proposal would also permit losses to be offset against gains once the new regime is in place.
As part of the plan, 105 cryptocurrencies would be reclassified as financial products. That reclassification would align their tax treatment with stocks and bonds and remove the existing miscellaneous-income designation for those assets. The change would shift taxable treatment from the current variable top rate to the proposed flat rate. The proposal explicitly provides for loss offsets under the new classification.
The reform package includes plans to launch crypto exchange-traded funds by 2028. Industry participants are pushing to accelerate the timeline and aim for implementation in 2027. Together, the tax-rate cut, the reclassification of 105 tokens, and the planned ETF launches constitute the central elements of the proposal.
Japan’s political landscape is marked by a snap election that has critical implications for the future of cryptocurrency reforms. All 465 seats in the House of Representatives are contested, with campaigning having started on January 27. The ruling Liberal Democratic Party currently faces a challenge, holding less than 30% party support. This election is seen as a pivotal moment, described as an “extremely weighty decision” that could determine Japan’s future direction Source.
Political figures have emphasized the significance of this election, particularly in terms of its impact on ongoing financial reforms. Sanae Takaichi, a prominent political leader, highlights the stakes involved, with the potential to influence not just governance but also the framework for crypto regulation. Sota Watanabe has expressed confidence that the new bill to incorporate crypto, which is being perceived as a groundbreaking step towards financial innovation, will pass regardless of the election outcome Source. These comments underscore the importance of the election, not only for political but also for economic policy, including the future of cryptocurrency in Japan.
Japan’s snap election is unfolding at the same time as a proposed overhaul of crypto policy, with lawmakers advancing a move to shift taxable treatment of cryptocurrencies from their current miscellaneous-income status to the same tax category as stocks and bonds and to introduce a substantially lower, flat tax rate by 2028. The plan also calls for reclassifying a set of tokens as financial products and for launching crypto exchange-traded funds on the proposed timeline, while political dynamics around the election will influence how quickly those reforms are enacted.
