As the United States celebrates a historic milestone with the approval of spot Bitcoin ETFs, Japan is getting ready to do the same. A series of high-profile reforms is being implemented, mixing regulatory overhauls, contemporary tax treatment, and a pitch to the world that it wants to draw foreign money into its markets.
Japan aims to be a major force in the world of digital finance. This desire comes at a time when this growing sector is becoming even more resilient despite ongoing geopolitical tensions. A testament to this growing strength is the recent performance of leading cryptocurrencies: over the past 30 days, Bitcoin has surged by 10%, surpassing the $120,000 mark and reaching a new all-time high. Meanwhile, Ethereum has jumped over 30%, now trading above $3,400. This rally is clearly reflected in the Bitcoin heatmap, which highlights strong investor interest and increased trading activity across key timeframes.
Japan’s financial regulatory authority, the Financial Services Agency (FSA), proposes reclassifying cryptocurrencies from payment instruments to financial products.
The FSA feels that digital assets should be designated like stocks or bonds, and not fall under the inadequate framework that is currently in place via the Financial Instruments and Exchange Act. The aim is to make the launch of crypto ETFs possible.
This shift is viewed as a vital push toward allowing institutional investors into Japan’s capital markets, instilling a fresh sense of financial innovation in the country, toward simplified and competitive taxation. Currently, profits from cryptocurrencies are taxed as other income, under a progressive system that can hit rates as high as 55%. For many investors, this is a significant barrier to overcome.
The government is considering a reform to establish a uniform tax rate of 20%, the same as that applied to stocks and investment funds. The idea is that with a standard rate, investors will be less inclined to relocate to places with better tax treatment.
Meanwhile, the United States has already approved Bitcoin ETFs, and financial institutions are making over 1,200 investments in cryptocurrencies. As that happens, Japan risks of being left behind, so the reform is to push Japan back into the crypto conversation. And it does that largely for geopolitical and economic reasons.
In his “new capitalism” program, Prime Minister Fumio Kishida views cryptocurrencies as a driver of growth that can help make Tokyo an international financial center. However, the absence of regulatory clarity appears to be fueling a quite steady outflow of capital.
This concerning development is illustrated by the case of Metaplanet, a firm listed on the Tokyo Stock Exchange. Its management made a decision that seems very much at odds with the idea of maximizing value for shareholders. Instead of investing in productive assets in Japan, where it is based, they decided to bet $5 billion on Bitcoin, transferring the funds to its US to make the purchase.
At the same time, the foreign exchange market offers additional insight into investor sentiment. The USDJPY rate has become a focal point for traders amid diverging monetary policies between the Federal Reserve and the Bank of Japan. With the yen remaining under pressure, a weakening JPY can both encourage capital outflows and impact Japan’s attractiveness as a financial hub — a factor the government must account for as it seeks to position Tokyo as a global crypto and fintech center.
That being said, the Japanese market is already quite well established, as it includes:
- More than 12 million active crypto accounts, which is more than for corporate bonds or Forex markets.
- Assets valued at over $31 billion on Japanese platforms.
- A projected growth rate for 2025 of 3.44%, according to Statista.
Also, in March 2025, SBI VC Trade obtained a license to manage stablecoins backed by USDC. Later in April, SMBC (Sumitomo Mitsui Banking Corporation) announced a partnership with Ava Labs to test yen- and dollar-denominated stablecoins.
Beyond cryptocurrencies, Japan is exploring tokenization of traditional assets (stocks, bonds, real estate). This approach aims to:
- Increase market liquidity.
- Make investment accessible to a larger number of citizens.
- Enhance transparency through blockchain technology.
- Reduce capital gains tax from 55% to 20%.
The government is considering helping to set up tokenized financial instruments, like ETFs, that are based on digital assets.
A fundamental shift is taking place in Japan’s crypto world. It could soon be running on something fundamentally different: a paradigm of regulatory clarity that combines tax incentives with a pro-innovation ethic. As that happens, Japan could be on its way to regaining lost ground as a strategic, digital-asset finance hub in Asia.
The time for Tokyo to wait has passed. In a world where global finance is being remade with the help of digital assets, Japan has placed itself firmly in the middle of this worldwide “reconstruction.”
Also Read: India’s Tax Reforms: Crypto Tax and Impact of 28% GST on Gaming
