Japan’s ruling Liberal Democratic Party (LDP) is making a groundbreaking push to reform cryptocurrency taxation, proposing to slash capital gains taxes on crypto investments to a flat 20%. This move would categorize digital assets as a separate asset class, signaling a shift in the country’s approach to crypto regulation.

According to LDP lawmaker Akira Shiizaki, the proposed changes would place cryptocurrencies outside the traditional securities framework under the Financial Instruments and Exchange Act. Additionally, the LDP suggests treating crypto derivatives trading similarly to spot investments and deferring taxes on crypto-to-crypto swaps. Instead of taxing these swaps immediately, taxation would only occur when digital assets are converted to fiat currency.

These reforms mark a significant shift in Japan’s stance on crypto, reflecting a move away from its historically cautious approach. The changes align with Japan's broader economic strategy of reducing reliance on U.S. debt assets and fostering domestic investment in emerging digital markets.

While Japan has never been outright anti-crypto, the government has maintained strict regulatory oversight to balance innovation with investor protection. In November 2024, Japan passed an economic stimulus bill that included commitments to crypto tax reforms, with the LDP inviting public input until March 31, 2025.

Japanese lawmaker Satoshi Hamada has also advocated for the adoption of a Bitcoin reserve strategy similar to the U.S., suggesting that Japan convert part of its foreign currency reserves into BTC. However, Prime Minister Shigeru Ishiba dismissed the idea, citing insufficient insight into U.S. Bitcoin policy.

Meanwhile, Japan’s Financial Services Agency (FSA) continues its regulatory oversight. In February 2025, the agency pressured Google and Apple to suspend unregistered crypto exchange apps until those platforms comply with Japanese regulations. These moves indicate Japan’s intent to support crypto growth while maintaining tight regulatory control.