As Japan heads to the polls on Sunday, Prime Minister Sanae Takaichi is betting her political future on increasing her approval rating to a parliamentary majority of 60-80%, which could accelerate crypto reform.
Takaichi turned the election into a referendum on his leadership. declare She is “staking my future as prime minister on this election.”
she called the move to dissolve parliament This is a “very important decision” that will “determine Japan’s path together with the people,” and will lead to the second general election in recent years.
Japan has endured 45 consecutive months of inflation above 2%, and concerns about fiscal discipline in a country with a public debt more than twice its GDP have driven down real wages and pushed government bond yields to their highest levels in decades.
If Takaichi’s coalition wins decisively, industry leaders expect faster legislative action, including smoother tax reform, faster legal reclassification, and stronger support for stablecoins and tokenization infrastructure.
If the results are fragmented, reforms are still expected, but they will take longer, be more negotiated, and be more susceptible to fiscal trade-offs.
Takaichi dissolved the parliament last month, just three months after taking office, and as the party faces its second general election in recent years, he sought to shift his personal popularity to a seat for the Liberal Democratic Party, whose approval rating has languished below 30%.
Election campaigns for all 465 seats in the House of Representatives began on January 27, with voters’ attention focused on inflation, wages, and the weak yen.
Cryptocurrency advocates are also closely monitoring the results for signals on planned tax cuts, stablecoin rules, and the proposed reclassification of cryptocurrencies under financial law.
virtual currency stakes
Japan is proceeding with fundamental reforms to cryptocurrencies, with plans to reduce taxes on cryptocurrencies. 55%～20% By 2028, reclassification 105 cryptocurrencies as financial products, and Launch of virtual currency ETF By 2028.
Currently, cryptocurrency gains are taxed as miscellaneous income at rates of up to 55%, and losses cannot be offset against other income.
The proposed changes would move cryptocurrencies into the same category as traditional financial assets such as stocks and bonds, allowing for a flat 20% tax rate and allowing investors to offset losses.
Sota Watanabe, founder of Aster Network and CEO of Startail Group, said: decryption He said that while tax reform is “already largely happening regardless of the outcome,” a crypto-friendly Congress could accelerate reform of stablecoins and tokenized securities.
“No one, no political party, is questioning cryptocurrencies and how they will shape the world in the coming years,” Watanabe said. “Regardless of the outcome, new legislation incorporating cryptocurrencies will be passed.”
He added that the 2028 timeline is “very slow” because “the industry is trying to do 2027.”
Watanabe said cryptocurrencies should be treated as part of national strategic planning, noting that the United States has already positioned cryptocurrencies as a strategic area and Japan should lead in tandem with cryptocurrencies rather than risk falling behind.
He said Japan’s cryptocurrency environment is “heavily led by large companies such as Sony, SBI, and many banks,” and explained that “stablecoins and tax breaks” are the most talked about topics.
changing tides
Last year, the Financial Services Agency began public consultations on reserve asset rules for regulated stablecoins, limiting eligible collateral to high-grade foreign bonds with an outstanding amount of 100 trillion yen or more.
Three Japanese megabanks, MUFG, SMBC, and Mizuho, have already rolled out stablecoin and tokenized deposit trials. Officially supported by the FSA In December.
Regarding Japan’s competitive position, Mr. Watanabe pointed to Japan’s strengths in finance and entertainment.
“If you look at global financial markets, the yen, Japanese stocks, and the Japanese economy as a whole already have a relatively strong global presence,” Watanabe said, adding that in his view almost all assets move on-chain over time.
worst case scenario
Mai Fujimoto, co-founder of Japan Blockchain Week and INTMAX, said: decryption He said a shift toward “a coalition driven by demographic populism rather than economic strategy” could fundamentally reshape crypto policy.
“If the Liberal Democratic Party maintains its power, there is virtually no worst-case scenario. Continuation is fundamental,” Fujimoto said. decryption. “Downside risks only materialize if demographic populism shifts political control to coalition governments.”
If that happens, Fujimoto warned that Japan could fall into a strengthened “silver democracy.” Cryptocurrencies will be treated as convenient tax bases rather than strategic infrastructure, and rather than being banned, they will be “harvested” with heavier taxes and stricter rules that gradually deplete capital and talent.
“It won’t kill the industry overnight, but it will quietly drain it of capital, talent and ambition,” Fujimoto said. “For more than two years, it will significantly slow down the momentum of Japanese cryptocurrencies.”
“Within the Liberal Democratic Party and the Democratic Party of Japan, crypto policy is embedded at an organizational level,” she added. “Regulatory dialogue with formal study groups, policy committees, and industry has created a baseline of common understanding.”
Regarding Japan’s competitive position, Fujimoto said the competition to rival Singapore, Dubai and South Korea as crypto startup hubs is already outdated, noting that while these markets mainly host funds and regulatory arbitrage, top startups are gravitating towards the US and Japan is pivoting to an institutional capital strategy rather than a “best startup hub” contest.
“Japan, which boasts the world’s largest external net asset position, is increasingly looking at how large pools of capital can be deployed, settled, hedged, and managed using crypto rails such as stablecoins, tokenized assets, and regulated on-chain finance,” Fujimoto said, echoing Watanabe’s sentiments.
If the chips turn politically in the wrong direction in a snap election, “the worst case is not just a delay, but Japan missing out on a window in the global capital cycle,” Yoshikazu Abe, chief strategy officer at Hyperism, told Decrypt.
Prime Minister Abe said, “If the government lowers the priority of Web3 and becomes “deliberation without action” on the 20% tax, it will be more than just a one-year delay,” and pointed out that revisions to the Financial Instruments and Exchange Act are not scheduled until 2028 and are “widely perceived to be overdue.”
Prime Minister Abe said, “What is important to investors is that the guarantee provisions will not be overturned by a change of government.” “The FSA and METI’s continued pro-Web3 position suggests that policy is hard-coded into the bureaucracy.”
