Nikkei reports that Japan's Financial Services Agency (FSA) plans to include the expansion of the Small Investment Tax Exemption System (NISA) in its tax reform proposal for the fiscal year 2026. The plan is part of Tokyo's broader vision to become an 'asset management nation.' This would enable its financial markets to attract greater participation from businesses.
Currently, gains from cryptocurrencies in Japan are considered 'miscellaneous income' under the tax code. They are subject to progressive rates that can reach 55%, including local taxes. The system has long been criticized for being punitive, especially compared to stocks and bonds, which are taxed at a fixed rate of 20%.
The FSA's proposal would change this situation by moving cryptocurrency gains to the same 20% bracket as stocks. This also allows investors to carry forward losses for up to three years. Officials argue that this parity will reduce the financial pressure on operators. It could also stimulate greater participation from both individuals and institutions.
Japan's troubled history with cryptocurrencies has shaped this reform package. The disappearance of Mt. Gox, based in Tokyo, in 2014 weakened confidence in digital assets. Since then, Japan has implemented some of the strictest cryptocurrency laws in the world, aiming to protect investors.
Additionally, in May, Japan faced economic challenges related to the collapse of the cryptocurrency market. This measure could also help mitigate future risks.
These reforms aim to classify cryptocurrencies as financial products under the Financial Instruments and Exchange Act (FIEA). This change would subject digital assets to the same rules that govern stocks and bonds. It allows regulators to enforce laws regarding insider trading, establish disclosure standards, and provide greater protection to investors.
