Japan’s finance minister disapproves tax reduction on crypto

Japanese finance minister, Taro Aso, said that he’s not willing to reduce the tax rate on crypto in the country to 20% because it’s difficult for many households to invest in digital assets. He said this as a response to a question from Japan Restoration Association member Shun Otokita at a meeting of the House of Councillors Committee on Financial Affairs held recently. 

Out of 1900 trillion yen [17.6 billion USD] financial assets held by households in Japan, around 900 trillion yen [8.4 billion USD] is now being held as cash deposits and that is abnormal.

Although Japan is the birthplace of crypto, the country still has numerous cash-based businesses and individuals who keep their savings liquid. According to Aso, since it would be hard to convince investors in Japan to put their cash into crypto, the tax rate should stay as is. In Japan, almost all crypto-related income is categorized as miscellaneous income on taxes. As such, they are subject to a rate of up to 55%. However, the country taxes stocks at a flat rate of 20%. Pro-crypto legislators have been requesting the govt to treat crypto-related income the same as stocks.

Under the modifications to Japan’s existing legislation on cryptocurrencies, which went into effect May 1, the Payment Services Act (PSA) requires that all references to “virtual currency” be replaced with the term “crypto asset”. 

Otokita asked Japan’s Financial Services Agency (FSA) if it was appropriate to cut the leverage cap for cryptocurrency margin trading to 2x. The leverage limit was lowered from 4x in the same regulations, which took effect May 1. The agency claimed to have discussed the matter with crypto experts and FX insiders, taking public comments into account. According to the FSA, lowering the leverage cap was an appropriate response to the volatility of cryptocurrencies.