Japan's Iron Lady, Sanae Takaichi, wins big! Will the 55% heavy tax on cryptocurrencies come to an end?

Japanese Prime Minister Sanae Takaichi achieved the biggest post-war victory in the February 8, 2026, parliamentary election, with the Liberal Democratic Party expected to secure between 274 and 326 seats. The market responded swiftly, with the USD/JPY rising 0.2% to 157, and Bitcoin/JPY surging 5%. This strong mandate paves the way for crypto tax reforms, with the current top tax rate of 55% potentially being reduced to 20%, along with capital gains tax and allowing losses to be carried forward for three years.

Sanae Takaichi’s Largest Post-War Victory, LDP Expected to Win 274-326 Seats

Sanae Takaichi achieved a historic landslide victory in the snap parliamentary election held on February 8, 2026. Her Liberal Democratic Party is projected to win between 274 and 326 out of 465 House of Representatives seats, marking the largest post-war election victory for a Japanese party. This decisive result consolidates Takaichi’s authority, enabling her to implement ambitious economic and regulatory reforms.

The scale of this victory far exceeded expectations. Pre-election polls predicted the LDP might face tougher competition, but ultimately, voters strongly supported Takaichi’s economic policies and leadership style. If the LDP ends up with the upper limit of 326 seats, it would hold an absolute majority of over two-thirds, allowing it to push constitutional amendments and major legislative reforms without needing coalition partners.

U.S. officials quickly commented on the election results. Treasury Secretary Scott Bessent called the victory “historic,” emphasizing the strength of U.S.-Japan relations under Takaichi’s leadership. A few days earlier, President Donald Trump also expressed full support, highlighting her leadership and recent achievements in trade and security.

Takaichi expressed gratitude, reaffirmed her plan to visit the White House in spring 2026, and stated that the U.S.-Japan alliance is built on deep trust and cooperation with “infinite potential.” This strong U.S.-Japan relationship could play a significant role in future economic and technological policies, including international coordination on cryptocurrency regulation.

Takaichi’s political style is often compared to former UK Prime Minister Margaret Thatcher, earning her the nickname “Japan’s Iron Lady.” She advocates for tough fiscal stimulus, prioritizing national security, and economic innovation—positions that have garnered broad voter support. She models her approach after her mentor Shinzo Abe’s “Abenomics,” adopting aggressive fiscal policies that could foster an environment conducive to risk assets.

Market Bets on “Takaichi Trade”: BTC/JPY Rises 5%

Markets reacted swiftly to Takaichi’s victory. The USD/JPY increased 0.2% to 157, and Bitcoin/JPY traded nearly 5% higher, reflecting investor confidence in her growth-promoting policies. The so-called “Takaichi trade” is driven by expectations of fiscal stimulus, loose monetary policy, and increased liquidity.

This market response is not limited to cryptocurrencies. Japan’s stock market soared to record highs, with the Nikkei 225 and TOPIX indices reaching new peaks. Investors are betting that the Takaichi government will introduce large-scale fiscal stimulus plans, including infrastructure investments, tech innovation subsidies, and corporate tax cuts. Such policy mixes typically boost market liquidity and elevate risk asset prices.

However, government bonds and the yen face pressure. The yield on Japan’s 10-year government bonds has risen, reflecting investor expectations that the government will issue more debt to support fiscal expansion. The yen’s depreciation is also a market anticipation that the Bank of Japan will maintain its loose monetary stance. For international investors holding yen-denominated assets, this depreciation could erode real returns.

Bitcoin/JPY’s 5% surge has sparked lively discussion in the crypto community. Part of this increase is attributed to yen depreciation (which raises Bitcoin prices in yen terms), but more importantly, it reflects expectations of reform in Japan’s crypto policies. Investors believe that Takaichi’s strong mandate increases the likelihood of crypto tax reforms passing within the next few years.

Core Logic of the “Takaichi Trade”

Fiscal Stimulus: Large government spending increases market liquidity

Loose Monetary Policy: Bank of Japan maintains low interest rates and quantitative easing

Yen Depreciation: Boosts export competitiveness but raises import costs

Rising Risk Assets: Stocks, cryptocurrencies, and high-beta assets benefit

Policy Reform Expectations: Crypto tax reforms and clearer regulation attract capital

Crypto Tax Reform Outlook: Top Tax Rate to Drop from 55% to 20%

Takaichi’s election victory is widely seen as a green light to accelerate Japan’s crypto reforms. Currently, Japan taxes crypto gains as miscellaneous income, with a top rate of up to 55%. This framework combines crypto earnings with other income like salaries and bonuses, applying progressive tax rates. For high earners, this means the marginal tax rate on crypto investments could reach the maximum.

Despite Japan’s leadership in blockchain applications, this harsh tax regime has driven many investors and projects to jurisdictions with lower or no taxes, such as Singapore and Dubai. The Financial Services Agency (FSA) and industry groups have long called for reform, but progress has been slow due to political reluctance and fiscal pressures.

The proposed reforms for fiscal year 2026 may include reducing capital gains tax to around 20%, allowing losses to be carried forward for three years, and reclassifying certain digital assets as financial products. If implemented, this would align Japan’s crypto tax rates with those on stocks and bonds, eliminating current tax discrimination.

A 20% capital gains tax would make Japan’s crypto tax regime comparable to the U.S. (up to 20% for long-term capital gains) and many European countries (generally 20-30%). The loss carryforward mechanism allows investors to offset crypto losses against future gains over three years, which is especially important given crypto’s high volatility.

Reclassifying digital assets as financial products rather than miscellaneous income would also impact regulation. As financial products, crypto assets would be subject to clearer consumer protection rules, anti-money laundering standards, and custody requirements. This clarity could attract more institutional investors and traditional financial firms into Japan’s crypto market.

It is generally believed that Takaichi’s support for economic growth and her willingness to cooperate with crypto-friendly opposition parties like the Japan Innovation Party and the Constitutional Democratic Party could ultimately push these long-awaited measures through before 2028. Early in her term, Takaichi has supported policies promoting technology, innovation, and economic security—aligning with broader blockchain and Web3 development.

Although she did not make cryptocurrencies a core campaign issue, her overall economic philosophy closely matches the demands of the crypto industry. She emphasizes competitiveness, innovation, and attracting international talent—key elements for the growth of crypto and tech sectors.

Policy Uncertainty: Japan’s Debt Crisis Remains a Concern

However, uncertainties persist. Japan’s public debt-to-GDP ratio peaked at 232.35% in 2025 and has now exceeded 250%, the highest among developed nations. Recently, the surge in government bond yields has also raised concerns about fiscal sustainability.

“Takaichi has promised to pursue active fiscal policies, mainly through bond issuance,” said analyst Rob Wallace. “Given investors’ ongoing worries about Japan’s massive debt burden and the recent spike in Japanese government bond yields, will her momentum lead to larger stimulus measures, or will political cover encourage more cautious steps?” he questioned.

This fiscal dilemma complicates crypto tax reform. On one hand, lowering crypto taxes could reduce government revenue in the short term, worsening an already strained fiscal situation. On the other hand, if tax reforms attract more investment and innovation back to Japan, they could broaden the tax base and increase overall revenue in the long run.

Key cabinet appointments and regulatory priorities will significantly influence the pace and scope of crypto reforms. Finance Minister Katsuya Kato’s continued tenure could help maintain policy continuity, but his limited involvement in crypto issues might hinder ambitious reforms. Digital Minister Masaki Hiraoka has yet to make clear statements on crypto or Web3, adding uncertainty to future policy directions.

Nevertheless, ongoing proposals from the Financial Services Agency, combined with Takaichi’s strong political backing, suggest Japan’s digital asset industry is approaching a turning point. If reforms succeed, they will provide clearer regulation, tax incentives, and legal recognition for crypto, laying the foundation for a more innovative ecosystem. This could transform Japan from a country losing crypto talent to a major hub for crypto innovation in Asia.