New Regulations Set to Launch a New Era for Cryptocurrencies in Japan

Japan is preparing for a comprehensive reform of cryptocurrency taxation. On December 19th, the Liberal Democratic Party of Japan and the Japan Reconstruction Party outlined the tax system reform for the Reiwa 8 fiscal year (2026).

The proposed draft defines cryptocurrencies as financial products that contribute to national asset formation and envisages the introduction of a separate tax system for these assets.

According to the proposal, spot transactions of cryptocurrencies, derivatives, and crypto ETFs will be subject to a separate taxation regime similar to stocks and other financial products. This would allow investors to carry forward trading losses for three years, meaning these losses could be deducted from profits earned in subsequent years. This would provide crypto investors with a tax framework closer to that of the stock market.

However, the reform draft does not cover all crypto transactions. It states that income-generating transactions such as staking and lending may remain under the current tax system. NFTs are not explicitly mentioned in the reform text; therefore, NFT income is expected to continue to be taxed under “other income” for now.

The new system mandates that cryptocurrency exchanges submit user transaction reports directly to tax authorities. This step means stricter tax compliance rules for investors. Experts argue that investors regularly preparing their transaction records before the reform comes into effect will be critical to a smooth transition.