Astar founder: "Japan general election result will significantly affect the pace of crypto regulatory overhaul"

Amid the ruling Liberal Democratic Party’s landslide victory in the recent House of Representatives general election, an argument has emerged that the outcome could influence the pace of Japan’s overhaul of cryptocurrency (crypto asset) taxation and regulation.

On the 17th (KST), Sota Watanabe, founder of ASTAR and CEO of Startale Group, wrote in an article for Blockhead that “with Prime Minister Sanae Takaichi securing a clear political mandate in this election, the momentum to push forward Japan’s crypto asset reforms has strengthened.”

Watanabe added that “crypto assets were not a key issue in this election, but whether the government can secure legislative drive will determine the timing of implementation,” explaining that “a government holding stable seats in the lower house can proceed with committee deliberations and plenary votes in a more predictable manner.”

Japan’s Financial Services Agency (FSA) is preparing a plan to bring crypto assets under the Financial Instruments and Exchange Act (FIEA) framework from the end of 2025. The core is to classify crypto assets as ‘investment assets,’ rather than as a means of payment.

Watanabe said, “Currently, crypto asset gains are classified as miscellaneous income and can be subject to a tax rate exceeding up to 50%,” adding, “once the overhaul takes effect, a capital gains tax at around 20% will apply at the time of sale, and loss carryforward deductions will also become available.”

He also assessed that progress is being made in institutionalizing stablecoins (crypto assets whose value is pegged to fiat currencies). Watanabe explained, “Following the implementation of the amended Payment Services Act, an authorization framework for fiat-backed stablecoins was put in place, and by the end of 2025, yen-denominated stablecoins began operating within that framework.”

However, Watanabe pointed out that in the short term, the macroeconomic environment is a bigger variable. He analyzed that “rising Japanese government bond yields, a weaker yen, and an expanding public debt burden are affecting the global liquidity environment,” and that “the crypto asset market is also responding more sensitively to changes in rates and liquidity than to regulatory issues.”

He continued, “This election is meaningful in that it has partially eased political uncertainty over the policy direction,” adding, “separately from the broader adjustment phase, Japan could become one of the countries among major economies to establish the most systematic digital asset regulatory framework.”