Japan’s Finance Minister, Katsunobu Kato, has publicly endorsed the inclusion of cryptocurrencies in diversified investment portfolios, emphasizing the need to establish a sound trading environment for the asset class. Speaking at the WebX 2025 digital assets forum in Tokyo, Kato acknowledged the inherent risks of crypto volatility but stressed that a well-regulated framework could mitigate these risks and allow for broader adoption. “Through building an appropriate investment environment, they could be part of diversified investments,” he stated, highlighting the government’s commitment to balancing innovation with oversight [1].
The minister’s remarks align with broader efforts by the Japanese government to create a more crypto-friendly environment. The Financial Services Agency (FSA) has proposed significant regulatory and tax reforms, including a reclassification of crypto gains for taxation purposes. Under the current system, profits from digital assets are treated as miscellaneous income, subjecting them to progressive tax rates of up to 55%. The FSA is pushing for a flat tax rate of approximately 20.315%, aligning crypto with equities and bonds to promote parity and ease entry for investors [2]. This reform is expected to take effect in fiscal 2026, aiming to simplify the tax code and encourage greater participation in the crypto market.
In addition to tax reforms, Japan is also advancing its regulatory framework for stablecoins. JPYC, a Tokyo-based fintech startup, has announced plans to issue the first yen-backed stablecoin later in 2025. The stablecoin, which will be fully convertible to the yen and backed by domestic savings and Japanese government bonds (JGBs), is intended to streamline cross-border transactions and attract institutional investors. The company’s CEO, Noritaka Okabe, highlighted the potential for the stablecoin to enhance the global value of the yen and support economic development. JPYC aims to issue over JPY 1 trillion (approximately $7 billion) in stablecoins over the next three years [3].
The government’s strategy includes the establishment of a Digital Finance Bureau within the FSA to oversee crypto regulation more effectively. This move reflects a broader recognition of the increasing integration of digital assets with traditional financial markets. Analysts suggest that Japan’s approach, combining regulatory clarity with investor-friendly policies, could position the country as a regional leader in blockchain innovation and digital finance [4]. The FSA is also considering the approval of crypto-based ETFs, a development that could further drive institutional adoption and market liquidity.
These developments come amid growing international interest in stablecoins and digital assets. For example, Japan’s finance giant SBI Group has partnered with blockchain platforms like Chainlink, Circle, and Ripple to develop tools for Asia’s financial institutions. These partnerships are part of a broader effort to leverage blockchain technology for financial services, including cross-border payments and asset management. Meanwhile, Japan’s Prime Minister, Shigeru Ishiba, has expressed support for fostering a conducive environment for digital innovation while ensuring that regulatory measures protect consumers [5].
Japan’s strategic pivot toward crypto-friendly policies signals a significant shift in its approach to digital assets. As the government continues to streamline regulations and reduce tax burdens, it is likely to attract both domestic and international investors. The upcoming reforms, coupled with the launch of yen-backed stablecoins and the potential for crypto ETFs, underscore Japan’s ambition to become a key player in the global digital finance landscape.
Source:
[1] title1 (https://cointelegraph.com/news/japanese-regulator-halves-taxes-on-crypto)
[2] title2 (https://www.coindesk.com/markets/2025/08/25/japan-s-finance-minister-says-crypto-assets-can-be-part-of-diversified-portfolio)
[3] title3 (https://www.reuters.com/sustainability/boards-policy-regulation/japan-startup-issue-first-yen-pegged-stablecoin-2025-08-19/)
[4] title4 (https://cryptodnes.bg/en/japan-prepares-wweeping-crypto-reforms-tax-cuts-and-etf-approval-on-the-horizon/)
[5] title5 (https://www.bitrue.com/blog/japan-new-crypto-law-20percent-flat-rate)
AloJapan.com