How will the Japanese Senate elections affect Bitcoin?

The upcoming Japanese Senate election marks an important turning point for crypto tax policy, with potential impacts that extend far beyond the domestic market. The political developments surrounding this election could fundamentally alter Japan's legal landscape regarding digital assets.

Meanwhile, the strength of the opposition against the ruling LDP-Komeito coalition is threatening the existing cryptocurrency tax frameworks, creating unprecedented opportunities for comprehensive reform. Investors and market observers are closely monitoring the political developments, as tax policy has become one of the central issues of the electoral campaign and has a significant impact on the Bitcoin market.

Things You Need to Know

Once one of the largest crypto markets in the world, Japan's position has declined following major scandals such as Mt. Gox and Coincheck.

However, the crypto market in Japan still holds great potential, as the total estimated personal financial assets amount to 2,000 trillion yen (, equivalent to about 13.5 trillion dollars ). However, the high tax rates and the complex calculation of losses for digital assets are creating significant barriers for investors.

The election on July 20 could change the governance structure of Japan, while also being a turning point for cryptocurrency policy.

Opposition parties are gradually gaining strength, while the ruling coalition is struggling with tax reform. The Japanese crypto industry is particularly concerned about changing the tax classification for digital assets – specifically, the opposition parties are calling for a separate tax system instead of classifying crypto under other income groups as is currently the case.

Election Outcome Forecast

The ruling coalition of LDP–Komeito is facing the risk of losing its majority in the House of Councillors. According to forecasts from the Yomiuri Shimbun, both parties in the coalition are likely to secure a historically low number of seats.

The Japanese Senate has a total of 248 seats, with a term of 6 years, and half of the seats will be re-elected every 3 years in a staggered manner. In this election, voters will elect 75 seats by electoral district and 50 seats by proportional representation.

Among the seats being voted on this time, the ruling coalition currently holds 66 seats. To maintain majority control in the Senate, the parties in the coalition need to secure at least over 50 seats.

Recent surveys indicate that the maximum number of seats the ruling coalition can secure is just over 50 seats – in the most optimistic scenario. Predictions from major newspapers show that the LDP can only win between 24–40 seats, while Komeito faces the risk of hitting a record low, with the forecasted number of seats only ranging from 6–13.

What will the victory of the opposition mean?

Currently, under the existing tax system, income from crypto is taxed at a maximum rate of 55%, as it is classified as other income. Meanwhile, the Democratic Party for the People – an opposition party, proposes to apply a separate fixed tax rate of 20% for digital assets.

If victorious, the opposition could accelerate the nationwide tax reform process. Proposed changes include eliminating taxes on token-to-token transactions and applying a mechanism to carry losses forward to subsequent years.

These lower barriers may encourage domestic capital flows to return to the Bitcoin market. Furthermore, the participation of financial institutions may increase due to clearer regulations and the potential approval of ETFs.

Scenario if the ruling coalition continues to hold power

If the ruling coalition wins, tax reforms are likely to be incremental and localized. Historically, the Japanese Ministry of Finance – a long-time ally of the coalition – has often opposed large-scale tax cuts.

Therefore, the demand for investing in Bitcoin will continue to be suppressed under the current high tax framework, unless there are significant reforms.

As of the time of writing, Bitcoin is trading at $117,118, down 0.3% in the past 24 hours.

!()https://img-cdn.gateio.im/webp-social/moments-c2f97b09def0f10c7e92cdce07afa615.webp[bitcoin]BTC price chart 3 hours | Source: TradingviewMinh Anh