Japan's recent snap election has delivered Prime Minister Sanae Takaichi and her ruling coalition a decisive supermajority in the Lower House, the Liberal Democratic Party's largest single-party result in postwar history. While cryptocurrency regulation was not a direct campaign issue, this political mandate will significantly shape the pace and implementation of Japan's ambitious digital asset reforms—the most comprehensive undertaken by any major economy.
The election outcome provides procedural clarity and legislative momentum. With full control of the Lower House, including the ability to override Upper House vetoes, the Takaichi government can move crypto reform legislation through committee stages and plenary votes more predictably. The reforms, which are no longer just proposals awaiting political validation, include plans to bring crypto assets under the Financial Instruments and Exchange Act, reclassifying them from a settlement instrument to an asset. This change would significantly reduce the tax burden, treating crypto gains as investment income with a capital gains tax of 20% (instead of miscellaneous income with marginal rates sometimes above 50%) and include loss carry-forward provisions.
Concurrently, Japan has quietly overtaken Singapore to become the largest hub for local-currency stablecoins in the Asia-Pacific region (APAC). On-chain data shows aggregate APAC local stablecoin supply has rebounded from roughly $40 million in mid-2025 to nearly $58–60 million by early 2026, with this recovery being narrow and Japan-led. The yen-denominated stablecoin JPYC has driven this growth, with its supply reaching approximately $26.4 million by February 2026, accounting for nearly half of the region's local-currency stablecoin market. This marks a reversal from early 2025 and follows JPYC's launch in October 2025.
Japan's macro environment adds urgency to these developments. The country faces a tightening macro triangle of a persistently weak yen, rising government bond yields at multi-decade highs, and outsized public debt. These dynamics narrow short-term policy responses and influence global markets. Rising Japanese yields and signals of further rate hikes from the Bank of Japan could affect the dynamics of the yen carry trade—a strategy where investors borrowed cheaply in yen to buy risk assets, including Bitcoin. Speculative short positions in the yen have already fallen sharply, contributing to a global repricing of risk assets. Bitcoin is trading at its lowest levels since early 2025, alongside selloffs in silver, gold, and U.S. tech stocks, reflecting sensitivity to shifts in global liquidity conditions where Japan's bond market plays a central role.
Finance Minister Satsuki Katayama has described 2026 as a 'Digital Year,' focusing on modernizing Japan's financial architecture. This builds on earlier efforts to normalize digital asset regulation and tax treatment and integrate stablecoin payment rails. Amendments to the Payment Services Act have already established a licensed issuance regime for fiat-backed stablecoins, with yen-denominated stablecoins operating under this framework by late 2025. Regulators are integrating crypto into Japan's existing financial regulation rather than treating it as a parallel system.
With over 13 million active crypto accounts nationwide and Japanese investors holding tens of billions of dollars in digital assets, Japan's regulatory trajectory will shape institutional participation in crypto. The election has cleared a major source of uncertainty, setting the stage for what could become the most structured and comprehensive regulatory framework for digital assets among major economies.
