For Japanese cryptocurrency (crypto asset) investors, the long-awaited “tax reform” has finally begun to move forward.
The “Outline of Tax Reform for Fiscal Year 2026 (Reiwa 8)” announced at the end of 2025 explicitly states the policy shift: crypto assets will transition from the current “comprehensive taxation” system to “separate taxation upon declaration,” aligning them with stocks and FX.
Is the era of heavy taxation, where “half your profits vanished in taxes,” finally ending?
Let’s break down the key points of the reform and how it will change our take-home pay.
Three Pillars of the 2026 Tax Reform
The following three changes are absolutely essential for investors to understand in this reform proposal.
① Tax Rate Reduced from Maximum 55% to “Flat 20.315%”
Currently, cryptocurrency gains are treated as “miscellaneous income (comprehensive taxation).”
Combined with resident tax, this results in a maximum tax rate of 55%.
After the revision, this is expected to become a flat 20.315% (15% income tax + 5% resident tax + special reconstruction income tax).
② Introduction of the “3-Year Loss Carryforward Deduction”
Previously, even if a large loss was incurred in a given year, it could not be offset against the following year’s profits.
After the amendment, losses can be carried forward for up to three years and deducted from future profits.
③ Aiming for implementation starting January 2028
If the amendment passes smoothly through the Diet, it is expected to take effect for transactions occurring on or after January 1, 2028 (Reiwa 10).
While this is still some time away, it will significantly impact exit strategies for stocks currently held.
【Simulation】How Much Will Your Taxes Be Reduced?
How much more money will you actually have left after applying the “separate taxation system”?
Let’s compare using the example of a typical salaried worker.
【Calculation Conditions】
- Salary income: 5 million yen
- Cryptocurrency gains: 5 million yen
| Item | Current System (Comprehensive Taxation) | After Revision (Separate Taxation for Declarations) | Difference (tax reduction amount) |
| Tax rate | Up to approximately 30% (progressive taxation) | Uniformly 20.315% | – |
| Estimated Tax Amount | Approximately 1.38 million yen | Approximately 1.02 million yen | Approximately ¥360,000 in tax savings! |
Important Note:
For individuals with lower incomes, the current “comprehensive taxation” system may offer a lower tax rate in some cases (e.g., income tax of 5% for income up to ¥1.95 million). It is important to note that the shift to a flat-rate separate taxation system could potentially increase the tax burden for certain income brackets.
How Will Investment Strategies Change? Experts Reveal the “Blind Spots”
It’s not just about being happy that prices have fallen.
You need to rethink your investment strategy itself.
- Tax-loss selling becomes an effective strategy
Selling stocks at a loss to realize unrealized losses at year-end and offset them against future profits becomes common practice, similar to stock investing. - Confirm Requirements for “Specified Cryptocurrencies”
Not all cryptocurrency holdings may qualify for separate taxation; eligibility may be limited to those meeting specific criteria. - Reduced Benefits of Incorporation
With the individual tax rate dropping to 20%, the relative hurdle for establishing corporations solely for tax savings purposes increases.
Things to Prepare Now
While waiting for the amendments, there are two preparations investors can make immediately.
- Thorough Management of Transaction History
Accurate proof of past acquisition costs is essential to claim carryover deductions.
Organize your records now using calculation tools. - Considering Long-Term Holding (HODL)
The option to deliberately hold assets now rather than sell, aiming for profit realization after 2028, has gained practicality under this proposed amendment.
Summary: Cryptocurrency Joins the Ranks of “Financial Instruments”
This amendment represents a major step forward, as Japan has officially recognized crypto assets not as “shady speculation” but as legitimate “financial instruments.”
It is also expected to bring back investors who had moved overseas citing “high taxes,” thereby revitalizing the market.
