Japan’s Crypto Industry Faces Critical Test Ahead of Snap Election

As Japan heads to the polls on Sunday, Prime Minister Sanae Takaichi is staking her political future on translating approval ratings of 60-80% into a parliamentary majority that could accelerate crypto reforms.

Takaichi has turned the election into a referendum on her leadership, declaring she is “putting my future as prime minister on this election.”

She called the parliament dissolution move an “extremely weighty decision” that would “determine Japan’s course together with the people,” setting up the country’s second general election in as many years. 

Japan has endured inflation above 2% for 45 consecutive months, with falling real wages and bond yields surging to multi-decade highs amid concerns about fiscal discipline in a country with public debt exceeding twice its GDP.

If Takaichi’s coalition wins decisively, industry leaders expect faster legislative throughput: smoother tax reform, quicker legal reclassification, and stronger backing for stablecoin and tokenization infrastructure.

If the result is fragmented, reforms are still expected, but slower, more negotiated, and more vulnerable to fiscal trade-offs.

Last month, Takaichi dissolved the parliament, just three months after taking office, marking Japan’s second election in as many years and seeking to convert personal popularity into seats for her Liberal Democratic Party, which languishes at under 30% party support.

Campaigning for all 465 seats in the House of Representatives began on January 27, with voters focused on inflation, wages, and the yen’s weakness. 

Crypto proponents are also closely watching the result for signals on planned tax cuts, stablecoin rules, and the proposed reclassification of cryptocurrencies under financial law.

Crypto stakes

Japan is pursuing sweeping crypto reforms, with plans to slash taxes from 55% to 20% by 2028, reclassifying 105 cryptos as financial products, and launching crypto ETFs by 2028. 

Currently, crypto gains are taxed as miscellaneous income at rates up to 55%, with no ability to offset losses against other income. 

The proposed changes would move crypto into the same category as traditional financial assets, such as stocks and bonds, enabling a flat 20% tax rate and allowing investors to offset losses. 

Sota Watanabe, founder of Astar Network and CEO of Startale Group, told Decrypt that tax reform is “already almost given regardless of outcome,” but a crypto-positive parliament could accelerate stablecoin and tokenized securities reforms.

“Nobody, no party is questioning crypto and how it shapes the world in the coming years,” Watanabe said. “Regardless of outcome, the new bill to incorporate crypto will be passed.”

The 2028 timeline is “very slow”…