Cryptocurrency is legally recognised as a means of payment under the Payment Services Act in Japan, and trading and holding crypto assets is fully legal and regulated.
The Financial Services Agency (FSA) is the primary regulator for crypto exchanges, and Japan maintains a formal registration regime for Crypto Asset Exchange Service Providers. Historically, however, the tax treatment of crypto gains in Japan has been among the most burdensome in the developed world, with profits classified as miscellaneous income and subject to combined national and local income tax rates of up to 55%.=
Capital Gains Tax Rules
Under the current Japanese tax framework, crypto gains are not separately classified as capital gains but are instead treated as miscellaneous income (zatsu shotoku) under the Income Tax Act.
Miscellaneous income is added to all other income sources in a taxpayer’s composite income tax calculation, meaning that for higher-earning individuals, crypto profits can be taxed at the maximum combined marginal rate of 55% (45% national income tax plus 10% individual inhabitant tax).
This contrasts sharply with the 20% flat rate applicable to gains from listed securities, exchange-traded funds, and other financial instruments in Japan, a discrepancy that has been the subject of sustained industry and political criticism.
How CGT Is Calculated
The gain on a crypto disposal is calculated as the total proceeds of the transaction minus the acquisition cost.
The National Tax Agency (NTA) requires that, where the same type of cryptocurrency has been acquired at multiple prices, the average acquisition cost method is used to determine the cost per unit. This means that a disposal of any quantity of a given crypto requires recalculation of the average cost across all units of that type held, which can be administratively complex for active traders. The gain (or loss) on each disposal is determined by comparing the disposal proceeds against this average unit cost. The proceeds of a crypto-to-crypto exchange are measured at the fair market value of the cryptocurrency received on the date of the transaction.
Under the 2026 reforms, the calculation methodology for gains is expected to remain broadly similar but the tax rate applicable to qualifying gains will change from the composite miscellaneous income rate to a flat 20% separate taxation rate.
The reforms will also introduce a mechanism for loss carryforward, which is absent under current rules. No loss carryforward or offset against other income categories is currently permitted for miscellaneous income arising from crypto.
Record Keeping
Japanese taxpayers must maintain detailed records of every crypto transaction, including the type of asset, date and price of each acquisition, date and proceeds of each disposal, and the calculation of gain or loss using the average cost method. Exchange records, receipts, and transaction histories should be retained for the standard statutory period.
The NTA has published calculation worksheets and guidance to assist taxpayers in computing gains under the average cost method. All amounts must be expressed in Japanese yen, with foreign currency amounts converted at the relevant exchange rate on the transaction date.
Income Tax Rules
Under the current regime, all crypto income is assessed as miscellaneous income and aggregated in the composite income tax calculation.
The applicable marginal rate depends on the taxpayer’s total aggregate income from all sources, ranging from 15% at the lowest bracket (5% national plus 10% local) to 55% at the highest. Miscellaneous income from crypto cannot be offset against losses in other income categories, and losses from crypto cannot be offset against gains from other forms of miscellaneous income arising outside crypto.
Where a person receives cryptocurrency as payment for services rendered, the taxable income is the fair market value of the crypto in yen at the date of receipt. Where an employer pays wages in cryptocurrency, the taxable employment income is similarly the yen market value at payment.
In both cases, a further tax event arises on disposal of the received crypto, with the gain calculated as the disposal proceeds minus the value on which income tax was previously paid (forming the cost base).
Corporate entities holding or trading crypto assets are taxed on their profits at the standard corporate income tax rates applicable in Japan, and corporate crypto gains are not subject to the limitations applicable to the miscellaneous income category for individuals.
Mining and Staking Treatment
Mining
Mining income in Japan is treated as miscellaneous income at the point of receipt under existing NTA guidance. The value of newly mined cryptocurrency is assessed as income on the date it is received, at the prevailing market price in yen.
Where mining is conducted as a commercial business, it may alternatively be assessed as business income (jigyo shotoku) rather than miscellaneous income. Business income treatment allows the deduction of business expenses including electricity costs, hardware depreciation, cooling infrastructure, and related operating costs, which is not available under the miscellaneous income category.
Upon the subsequent disposal of mined cryptocurrency, a further tax event arises. The gain is calculated as the disposal proceeds minus the cost base, which is the value on which income tax was paid at the time of receipt.
Under the 2026 reforms, it is anticipated that gains from the disposal of mined crypto assets will fall within the scope of the 20% flat rate treatment, though the interaction between the income tax charge on receipt and the capital gains treatment on disposal under the new rules will require clarification in the implementing regulations.
Staking
Staking income is treated in Japan as miscellaneous income at the date of receipt of each reward, consistent with the treatment of mining income.
The taxable amount is the fair market value of the staking rewards in yen on the date of receipt. Where staking is conducted through a third-party operator or DeFi protocol, the principles remain the same, though the administrative challenge of identifying the precise date and value of each reward requires careful record-keeping.
NFT Taxation
Non-fungible tokens are treated in Japan as assets subject to the general miscellaneous income framework under existing rules, rather than as a distinct asset class.
The disposal of an NFT gives rise to a miscellaneous income calculation in the same way as for cryptocurrency. The gain is the disposal proceeds minus the acquisition cost, and is assessed as miscellaneous income in the year of disposal.
Where NFTs are created and sold by individuals as part of an artistic or commercial activity, the income received is more likely to be assessed as business income (jigyo shotoku), with the deductibility of directly related costs.
The NTA has not published comprehensive standalone guidance on the taxation of NFTs, though general income tax principles applicable to other digital asset transactions apply.
Reporting Requirements
All taxpayers with crypto gains must include them in their annual income tax return, Kakutei Shinkoku.
The standard filing period is 16 February to 15 March of the year following the relevant tax year. Income tax for the year is paid at the time of filing, with interim advance payments required for taxpayers whose prior-year liability exceeded certain thresholds.
Crypto gains are included in the miscellaneous income section of the return, with a full breakdown of transactions attached as a supporting schedule. The NTA provides calculation worksheets on its website to assist taxpayers in computing gains under the average cost method.
Salaried employees whose only source of income is employment wages may benefit from a simplified reporting exemption, though this threshold applies to all miscellaneous income combined and not to crypto gains specifically.
Where gains exceed ¥200,000, or where the taxpayer has other income requiring self-assessment, a full Kakutei Shinkoku return must be filed. All amounts must be expressed in yen, with foreign currency amounts converted at the TTS (Telegraphic Transfer Selling) rate applicable on the transaction date, as per NTA practice.
The FSA’s exchange registration regime means that domestic licensed exchanges maintain records of all Japanese customer transactions and are subject to regulatory oversight. International information exchange arrangements mean that offshore exchange activity by Japanese residents is increasingly visible to the NTA.
Penalties
Japan’s penalty regime for tax non-compliance applies to crypto income in the same manner as other taxes.
Failure to file a Kakutei Shinkoku return by the deadline results in a non-filing penalty calculated as a percentage of the tax due. Failure to pay tax by the due date results in late-payment interest accruing at the statutory rate.
Where the NTA identifies unreported income in the course of an investigation, it issues an additional assessment including both the primary tax liability and a penalty for underreporting, which may be 10%-15% of the additional tax for negligent underreporting and 35% where the omission is found to be fraudulent.
The NTA has significantly increased its focus on crypto non-compliance in recent years, including issuing information requests to domestic exchanges and conducting audit campaigns targeting taxpayers identified through data-matching as having material unreported crypto income.
Taxpayers who proactively correct their returns and pay outstanding tax before receiving a formal inquiry from the NTA benefit from reduced penalty rates. Voluntary correction (kisei-sinkoku) filed before a formal investigation is commenced eliminates or substantially reduces penalties, providing a strong incentive for early self-correction.
