Japanese Investors Are Pulling Out of Crypto, and Here’s Why

Japanese investors are reducing their crypto exposure, and the cause is not what most might assume. Whereas global discussions focus on prices and sentiment, surveys show that many Japanese investors are deterred mainly by complex tax requirements, rather than market volatility.

The Impact of Tax Pressure on Japanese Investors

Japan’s tax rules are widely regarded as strict, and crypto holders often find them particularly demanding. A national survey by financial platform 400F found that 22.2% of former crypto investors cited tax complexity as their main reason for leaving the market. Market volatility ranked lower at 19.4%, reversing the usual narrative.

Crypto profits are treated as “miscellaneous income”, which can mean tax rates up to 55% after local taxes. Every transaction must be tracked in yen, including buying, selling, swapping, and even small transfers. Some investors use software like CryptoLinC or Gtax, but these still need manual checks, especially when tokens move across multiple wallets.

As a result, paperwork has become nearly as challenging as market risk. Among active investors, 61.4% worry about volatility, while 60% find taxes just as overwhelming. Emotional stress and paperwork are both heavy.

The survey also shows a difference for those used to NISA or iDeCo accounts, which have simple reporting. Investors familiar with apps like Rakuten Securities or SBI find crypto filing much more time-consuming and complicated when they switch to decentralized platforms.

Growing Interest in Clearer Regulation

Despite some frustration, many Japanese investors are not avoiding crypto altogether; they are waiting for clearer rules. About 70.6% of respondents say their risk tolerance is neutral, showing a balanced approach. Around 40% say they might invest more in crypto if Japan’s regulations were easier to understand.

This caution is not new. On Japanese crypto forums, users often share tips on transactions like cross-chain swaps, staking rewards, or NFT sales. These discussions show that investors rely on community advice when official guidance is unclear.

The good news is that the media analysts suggested tax reform might happen sooner than expected. Even without confirmation, there is a cautious optimism building.

Where Japanese Investors Get Their Crypto Information?

The sources Japanese crypto investors rely on are notably varied. Survey results indicate that 63% use official or expert media, while 58.9% consult social media and influencers. This reflects a broader tendency: investors value accurate, verifiable information but are also shaped by online conversations and shared experiences.

Thus, information from exchanges, government websites, and financial advisors is often paired with insights from X or Reddit. Mainstream media covers rules, while social channels help with practical matters like reporting small trades, using tax tools, or managing unexpected fees.

How Will It Affect The Crypto Market?

The gradual withdrawal of Japanese investors is likely to create downward pressure on cryptocurrency prices globally. At the same time, liquidity on Japanese exchanges is likely to decline, since fewer active traders will be participating locally. This reduction in local liquidity could make it harder to execute trades efficiently on national platforms, even if global markets remain relatively stable.

This reflects that Japan-specific factors, such as tax regulations, reporting obligations, and unclear rules, can have a direct impact on global crypto market dynamics.

It is becoming increasingly evident that crypto activity in Japan is shaped less by market movements and more by regulatory clarity and administrative convenience. While volatility remains a concern, complicated taxes and unclear regulations have stronger influences. If regulators simplify reporting and adjust tax rates, participation could rise again, perhaps quickly.