The First Step

Discussions of crypto taxation usually begin with income tax. Looking back through tax reform outlines, however, that was not where the first decision was made.

A tax reform outline is a Cabinet-approved government document setting out changes for the following fiscal year: a blueprint before legislation. “Virtual currency” first appeared in the FY2017 outline, approved on December 22, 2016, in Chapter IV, “Consumption Taxation.”

“(1) Transfers of virtual currency under the Payment Services Act shall be exempt from consumption tax.”

That is the starting point. This article traces the original outlines from FY2010 through FY2026.

Timeline

A dash in the publication-date column means the Cabinet approval date has not been verified. For FY2024, no date appeared in the Ministry of Finance webpage text, so it remains unverified. For FY2025, only Chapters I, “Individual Income Taxation,” and VII, “Improving the Tax Administration Environment,” were reviewed.

For years marked as having no reference, the full original outline was converted to text and searched for both “virtual currency” and “crypto assets,” confirming no matches. The search covered every page of the main text.

Consumption Tax Came First

Reading the timeline from the top, there are no entries through FY2016. Exchanges had begun operating in Japan, yet the outlines contained not a single line on the subject.

I believe there is a reason consumption tax appeared first. Consumption tax asks the threshold question of whether a transaction is taxed, which cannot be postponed once transactions occur. Income and corporation tax ask how much income arises, and returns can be filed even without dedicated rules. The threshold question was settled first.

The words “shall be exempt” indicate that the transactions were previously taxable. Setting a transition date creates boundary issues. Note 3 of the outline introduced the following measure.

“(Note 3) Where a business holds virtual currency worth at least JPY 1 million excluding tax on June 30, 2017 (limited to currency acquired domestically), and its quantity held that day exceeds the average daily quantity held from June 1 through June 30, 2017, the input tax credit shall not be allowed for consumption tax on taxable purchases corresponding to that increase.”

The June 30 balance is compared with the preceding month's average; any increase is denied input tax credit. This prevents buying before the switch to claim credits and selling tax-exempt afterward. Using “quantity held” rather than value reveals the aim. The statutory structure is discussed in Why Crypto Asset Sales Are Exempt from Consumption Tax: The Basis and Background We are dealing with that.

The Year Individual and Corporate Treatment Was Established

Dedicated income and corporation tax rules arrived two years later. The FY2019 outline, approved on December 21, 2018, addressed both individuals and corporations. For individuals, it stated:

“The value of virtual currency held at period-end shall be its acquisition cost calculated using the moving average or total average method.”

This was the starting point of the mechanism now found in Article 48-2 of the Income Tax Act. For corporations, five items appeared in Chapter III, “Corporate Taxation.”

“(1) For virtual currency held by a corporation at fiscal year-end for which an active market exists, valuation gains and losses shall be recognized through market valuation.”

“(2) Gains and losses on a corporation's transfer of virtual currency shall be recognized in the fiscal year containing the date the transfer agreement was concluded.”

“(4) For unsettled virtual currency margin transactions and similar transactions held at fiscal year-end, amounts equivalent to gains or losses calculated as if settled at year-end shall be recognized.”

These are three different matters: year-end valuation, timing of transfer gains and losses, and treatment of outstanding positions. A note also specified commencement.

“These amendments apply to corporation tax for fiscal years ending on or after April 1, 2019.”

The same note provided transitional relief for fiscal years beginning before and ending on or after that date: items (1) and (4) need not apply if virtual currency was not marked to market for accounting purposes. This was a first-year exception.

The Year the Name Changed

“Crypto assets” first appeared in the FY2020 outline, approved on December 20, 2019. This followed amendments to the Payment Services Act and other legislation, rather than a change in substance. However, “virtual currency” remained elsewhere in the outline; terminology was not entirely replaced that year. Quotations here retain “virtual currency” where the original uses it.

That year's decisions concerned derivatives, rather than crypto assets themselves.

“(1) Miscellaneous income and similar income from crypto asset derivatives transactions shall be excluded from the special taxation provisions for futures-related miscellaneous income and the loss carryforward deduction for settlement of futures transactions by payment of differences or similar means.”

The futures regime permits separate assessment taxation and loss carryforwards. This sentence excluded crypto derivatives from that regime—the opposite direction from FY2026.

“(a) The head of an office of a financial instruments business operator or similar entity receiving orders for crypto derivatives transactions must submit to the tax office director, by January 31 of the following year, a payment report stating the aggregate gains or losses realized during the year through settlement by payment of differences or similar means.”

This specifies what the intermediary, rather than the taxpayer, must submit. After the tax rules were created, arrangements were made to collect the information underlying them.

The Year Self-Issued Tokens Were Excluded

Corporate market valuation recognizes gains and losses merely from holding assets at year-end. It weighed particularly heavily on corporations issuing their own tokens. If effectively unsaleable assets were covered, income without corresponding cash was taxed. The FY2023 outline, approved on December 23, 2022, addressed this.

“(1) Crypto assets meeting the following requirements shall be excluded from the scope of crypto assets held by corporations at fiscal year-end for which market valuation gains and losses are recognized.”

The two requirements were “(a) self-issued crypto assets held continuously from issuance” and “(b) transfer restrictions maintained continuously from issuance by one of the following means.” The two means were technical measures preventing transfer or holding the assets as trust property in a trust meeting specified requirements.

“(2) The acquisition cost of self-issued crypto assets shall be the expenses incurred for issuance.”

Self-issued assets have no purchase price. The opening text stated that “the revision in (2) below shall also apply to income tax,” so this was not solely a corporate tax change.

The Year Other Issuers' Tokens Became Eligible for an Election

The FY2023 relief covered only self-issued assets. Corporations acquiring other issuers' tokens subject to conditions remained subject to market valuation. The FY2024 outline expanded the scope.

“(4) The year-end value of crypto assets held by corporations that qualify as market crypto assets and are subject to transfer restrictions or other conditions shall be calculated using the method selected by the corporation from the following methods (for self-issued assets held continuously from issuance, method (1)).”

The choices were “(1) cost method” and “(2) market value method.” The parenthetical fixes cost for continuously held self-issued assets; corporations choose for other issuers' assets. Note 1 contains two eligibility requirements: measures preventing transfer, and a second requirement newly introduced that year.

“(2) The holder or other relevant person must notify a crypto asset exchange service provider or take similar steps that the restriction in (1) applies, so that an accredited payment service providers association can publish that fact.”

Technical inability to transfer is not enough; the restriction must be externally visible. Extending the scope to others' issues requires third parties to be able to verify restrictions. Elections are made by type and notified by the filing deadline for the fiscal year of acquisition. Without notification, the cost method applies.

What Comes Next

The timeline ends with the FY2026 outline, approved on December 26, 2025. It proposed moving individuals' crypto income to separate assessment taxation—the reverse of the FY2020 exclusion of crypto derivatives from the futures regime. Details are in Key points of the FY2026 tax system revision outline.

An outline is not law itself. Measures apply after the Diet enacts legislation, Cabinet Orders are prepared, and the effective date arrives. The timeline gives commencement dates only where stated in the outline's notes; it does not supply dates for years without such notes.

Points that require care in practice

• How commencement is measured. The FY2019 corporate rules use fiscal year-end, not commencement, so the first affected year varies with a company's year-end month.
• The exclusions from market valuation changed between FY2023 and FY2024. Reviewing a past year-end requires checking which rules applied to that fiscal year.
• Whether an election under the FY2024 system was notified on time. Without notification the cost method applies, so calculations using market value would rest on the wrong basis.
• Whether a year with no mention in the outline can be treated as a year with no change. Absence of the terms from the outline is different from absence of guidance in circulars or other materials.

The starting point is which period's rules apply. For filing, identify the relevant calendar or fiscal year before checking the treatment.

Source

• FY2017 Tax Reform Outline (Cabinet approval: December 22, 2016), IV Consumption Taxation / Quoted wording: “(2) Review of taxation relating to virtual currency”; “(1) Transfers of virtual currency under the Payment Services Act shall be exempt from consumption tax”; “These amendments apply to transfers of assets and similar transactions and taxable purchases conducted in Japan by businesses on or after July 1, 2017.”
• FY2017 Tax Reform Outline, IV Consumption Taxation, Note 3 / Quoted wording: “Where a business holds virtual currency worth at least JPY 1 million excluding tax on June 30, 2017 (limited to currency acquired domestically), and its quantity held that day exceeds the average daily quantity held from June 1 through June 30, 2017, the input tax credit shall not be allowed for consumption tax on taxable purchases corresponding to that increase.”
• FY2019 Tax Reform Outline (Cabinet approval: December 21, 2018), I Individual Income Taxation / Quoted wording: “The value of virtual currency held at period-end shall be its acquisition cost calculated using the moving average or total average method.”
• FY2019 Tax Reform Outline, III Corporate Taxation / Quoted wording: “Measures including introduction of the market value method for corporate valuation of virtual currency shall be taken as follows”; “(1) For virtual currency held at fiscal year-end for which an active market exists, valuation gains and losses shall be recognized through market valuation”; “(2) Transfer gains and losses shall be recognized in the fiscal year containing the transfer agreement date”; “(4) Outstanding virtual currency margin transactions and similar transactions shall generate gains or losses calculated as if settled at fiscal year-end.”
• FY2019 Tax Reform Outline, III Corporate Taxation, Note / Quoted wording: “These amendments apply to corporation tax for fiscal years ending on or after April 1, 2019”; “For fiscal years beginning before and ending on or after that date, transitional measures shall allow items (1) and (4) not to apply if virtual currency is not marked to market for accounting purposes.”
• FY2020 Tax Reform Outline (Cabinet approval: December 20, 2019) / Quoted wording: “(1) Miscellaneous income and similar income from crypto derivatives shall be excluded from the special taxation provisions for futures-related miscellaneous income and the loss carryforward deduction for futures settlement by payment of differences or similar means”; “(a) The head of an office of a financial instruments business operator or similar entity receiving orders for crypto derivatives must submit a payment report to the tax office director by January 31 of the following year, stating aggregate gains or losses realized through such settlement during the year.”
• FY2023 Tax Reform Outline (Cabinet approval: December 23, 2022), III Corporate Taxation / Quoted wording: “The revision in (2) below shall also apply to income tax”; “(1) Crypto assets meeting the following requirements shall be excluded from those held at corporate fiscal year-end for which market valuation gains and losses are recognized”; “(a) self-issued assets held continuously from issuance”; “(b) transfer restrictions maintained continuously from issuance through one of the following means”; “(2) Acquisition cost of self-issued crypto assets shall be issuance expenses.”
• FY2024 Tax Reform Outline, III Corporate Taxation, Expansions and Other Changes / Quoted wording: “(4) The year-end value of held crypto assets qualifying as market crypto assets and subject to transfer restrictions or other conditions shall be calculated using the corporation's selected method (for self-issued assets continuously held since issuance, method (1))”; “(1) cost method”; “(2) market value method”; “(2) The holder or other relevant person must notify a crypto asset exchange service provider or take similar steps that the restriction in (1) applies, so that an accredited payment service providers association can publish that fact”; “Notification must be made to the tax office director having jurisdiction over the place of tax payment by the final return deadline for the fiscal year of acquisition.”
• FY2026 Tax Reform Outline (Cabinet approval: December 26, 2025) / Transition to separate assessment taxation and other measures. See Key Points of the FY2026 Tax Reform Outline for details.
• Years without References / The full texts of the FY2010–FY2016, FY2018, FY2021, and FY2022 outlines were searched for “virtual currency” and “crypto assets,” with no matches. For the FY2025 outline (Cabinet approval: December 27, 2024), only Chapters I, Individual Income Taxation, and VII, Improving the Tax Administration Environment, were reviewed; other chapters were not checked.
• Referenced Provision / Income Tax Act, Article 48-2 (Calculation of Crypto Asset Transfer Costs and Methods of Valuation)