Japan’s Crypto Tax Reform Era Begins: How the Takaichi Cabinet Is Reshaping Web3

TLDR:

• • Japan’s LDP secured over two-thirds of seats, fast-tracking long-delayed crypto tax reform proposals.
    
  • The FSA plans to reclassify Bitcoin and Ethereum as financial instruments, enabling spot ETFs.
    
  • A flat 20% crypto tax rate has bipartisan support and is expected to move forward under the new cabinet.
  • STARTALE’s Watanabe says regulatory clarity will draw foreign investment and unlock domestic Web3 growth.

Crypto asset tax reform in Japan has moved closer to reality following the inauguration of the second Takaichi Cabinet.

The Liberal Democratic Party secured more than two-thirds of seats in the House of Representatives elections. This strong political base is expected to accelerate long-pending regulatory changes.

STARTALE Group CEO Sota Watanabe told BeInCrypto that the election results could compress the reform timeline by months. Japan’s Web3 industry is now watching closely as key policy changes take shape.

New Administration Sets the Stage for Faster Regulatory Action

The second Takaichi Cabinet was officially inaugurated on the 18th of this month. With a commanding legislative majority, the new government now holds enough political capital to push through stalled reforms.

Watanabe noted that several proposals had already been drafted but were waiting for political prioritization.

Watanabe was direct about what the election outcome means for reform speed. “With Governor Takaichi’s landslide victory, the new administration has gained the political capital necessary to expedite the reforms that had already been drafted but were waiting to be prioritized,” he said.

He added that the outcome is expected to “accelerate the timeline for reform in months compared to divided governments and uncertain outcomes.”

Japan’s Financial Services Agency (FSA) has signaled its intent to reclassify crypto assets. Bitcoin and Ethereum could shift from “payment methods” to regulated financial instruments.

A flat 20% separate taxation on crypto trading gains is also on the table, with bipartisan support strengthening its chances of passing.

FSA Reclassification Could Unlock Spot ETFs and Institutional Products

If the FSA reclassification moves forward under the revised Financial Instruments and Exchange Act (FIEA), spot crypto ETFs become a real possibility.

Japan’s ETF market has already shown early momentum in this direction. Formalizing the framework would give institutional investors a regulated entry point into digital assets.

Watanabe described the reclassification as a foundational shift. “The FSA has already indicated its intention to reclassify many crypto assets, including Bitcoin and Ethereum, from payment methods to regulated financial instruments,” he explained.

“This is a foundational change that allows for institutional entry, ETF development, and a more mature market structure.”

The FIEA revision would also establish a framework for securitized crypto products. This aligns crypto assets with the same legal standing as stocks and other securities.

Watanabe noted that Japan is taking a framework-first approach, unlike the United States, which approved spot Bitcoin ETFs before establishing a unified federal regulatory structure.

Japan’s Position in Asia and Global Crypto Markets

Japan held the most comprehensive crypto regulatory framework in Asia for many years. However, that framework was also viewed as overly restrictive by many in the industry. That perception, according to Watanabe, is now beginning to shift.

On the global comparison, Watanabe was clear about where Japan stands. “If the amendment to the Financial Instruments and Exchange Act is passed and the 20% tax rate takes effect, Japan will become one of the countries with the most consistent end-to-end regulatory environment for digital assets in the world,” he said.

He also noted that while Hong Kong promotes its VASP licensing system aggressively, it “does not have the domestic consumer market and corporate ecosystem that Japan provides.”

On the global stage, Japan’s end-to-end regulatory clarity sets it apart from other markets. That consistency is what foreign businesses and institutional investors look for when choosing a base. The upcoming reforms are expected to solidify that position further.

STARTALE’s Strategic Role in Japan’s Web3 Infrastructure

STARTALE Group is currently co-developing Soneium, a Layer 2 blockchain, with Sony. The company is also working with SBI Holdings on a JPY-denominated stablecoin and a Layer 1 blockchain called Straivm. These projects reflect the kind of long-term institutional commitment that regulatory clarity makes possible.

Watanabe spoke directly about how regulatory uncertainty has affected operations. “We’ve seen firsthand how regulatory uncertainty can hold back both domestic builders and international partners,” he said.

“The results of this election eliminate that key variable.” He also noted that treating cryptocurrencies as financial instruments “changes the quality of interactions with institutional, bank, and corporate clients.”

For foreign companies, a flat tax rate and clear FIEA classifications make Japan one of the most attractive regulated markets globally. Japan already has one of the most active retail investor bases in the world.

As Watanabe put it, the reforms under consideration will “unleash a wave of domestic innovation and foreign investment that the Japanese Web3 sector has been waiting for.”

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