Japan’s finance minister acknowledges crypto investment merits
Katsunobu Katō, a Liberal Democratic Party politician and Japan's Minister of Finance under Prime Minister Shigeru Ishiba's government since October 2024, has said that cryptocurrency assets can play a role in a diversified investment portfolio.
Katō made the remarks while speaking at an event that was held in Tokyo related to the subject of crypto assets on Aug. 25, according to Bloomberg. Katō stated:
''Crypto assets run the risk of high volatility, but if an appropriate investment environment is created, they can become targets for diversified investment.''
Growing crypto user base
Katō acknowledged that there is a growing user base in Japan related to digital assets. With that, he intends to work towards the provision of a healthy trading environment in Japan for stakeholders within the digital assets sector.
The finance minister added that he has been trying to balance regulation with a need to leave the digital assets sector with sufficient freedom so as to enable the development of innovation.
Crypto tax reform
It emerged over the weekend that the Japanese financial regulator, the Financial Services Agency (FSA), intends to include tax reform measures in respect of the crypto sector in 2026 tax revision proposals that it will bring to the Japanese government. It’s expected that the proposals, scheduled for submission by the end of this month, will call for a separate taxation category for digital assets and the implementation of a flat 20% tax rate.
Under Japan’s existing tax regimen, crypto trading gains must be reported under the categorization of “miscellaneous income,” with those gains subject to tax rates of up to 55%. The move would bring taxation on crypto trading gains in line with the tax treatment that’s currently in place for equity trading gains. Equities have been given their own category and are taxed at a flat rate of 20%.
Reclassifying cryptocurrencies
Additionally, the FSA plans to propose legislation next year that would result in the reclassification of cryptocurrencies, removing them from their current treatment as a means of payment under the Payment Services Act. The regulator wants crypto to come under the Financial Instruments and Exchange Act, reclassifying it as a financial product.
Katō has outlined his party’s commitment to the consideration of reviewing crypto asset taxation. That item was incorporated into his government’s tax reform plan for 2025, while the Japanese cabinet approved a proposal to amend the Payment Services Act back in March.
As part of plans to have digital assets categorized as financial products, the FSA is also understood to be interested in broadening the scope of insider trading restrictions.
Kato’s remarks are being interpreted as positive for the crypto sector. According to International Monetary Fund (IMF) data, Japan is the world’s fifth-largest economy, with a gross domestic product (GDP) exceeding $4.1 trillion.
In further positive news for the sector in Japan, it was reported on Aug. 18 that the FSA is likely to approve the issuance of JPYC, a Japanese yen-backed stablecoin, over the course of the coming months.
