Web 3.0 in Japan

Japan Lagging Behind in Emerging Technologies

After years of lagging in technological innovation, Japan is making a strong effort to catch up in cutting-edge fields like NFT, Web 3.0, and the metaverse and to boost the start-up industry.

Japan dropped one spot from last year to 29th in the global digital rankings over the past 12 months, trailing behinds its neighbours Singapore (4th), South Korea (8th), Hong Kong (9th), Taiwan (11th), and China (17th).

Because of its tax regulations, Japan currently has a disadvantage over countries like Singapore and Dubai which has led to falling behind in developing talent and not had enough successful digital initiatives. Indeed, some business owners who are exploring Web 3.0-related ventures are leaving Japan in search of chances abroad, necessitating a faster pace of business environment development in Japan.

Relaxation of Crypto and Digital Rules

According to Masaaki Taira, head of the Web 3.0 project team at Japan’s Virtual and Crypto assets Exchange Association, Japan needs to further loosen regulations for its cryptocurrency industry following the association’s recent decision to shorten the time-consuming review process for crypto token listings on exchanges.

Taira published a white paper in April 2022 on the use of Web 3.0 and non-fungible tokens (NFT) as a growth catalyst.

Expanding Web 3.0 Usage

The government, according to Prime Minister Kishida Fumio, wants to increase the use of Web 3.0 and NFTs, speed up the start-up industry, and expand tenfold the number of start-ups in new fields like biotech, AI, and robotics in the next five years to make Web3 a pillar of economic reform.

To support the use of blockchain in business and government and to expand preferential treatment in public procurement, taxation treatment, and financial support while reducing bureaucracy, the government has established a Web 3.0 office under the Ministry of Economy, Trade and Industry, or METI.

The government’s aim of economic recovery and community revitalisation is aligned with Web3, including a strategy to entice private investment back to Japan and carry out the campaign promise of wealth creation and distribution.

The Web 3.0 office will bring together the divisions in charge of corporate systems, industry, finance, taxation, sports, fashion, and other related businesses. Collaboration with the Digital Agency and other significant ministries will increase the foundation for analysing the business environment difficulties related to Web 3.0.

The Web 3.0 Policy Office will consult with business owners, investors, lawyers, engineers, and other parties to learn more about the challenges facing the domestic and international business environments, and it will collaborate with the relevant ministries and agencies to create the business environment for Web 3.0.

Getting Politicians Involved

It was suggested in a white paper that Japan needed a Web3 minister, and a one-stop shop consultation desk so that private businesses and entrepreneurs wouldn’t have to contact with various ministries.

Despite having the title “NFT White Paper,” the paper’s subtitle, “Japan’s NFT strategy for the Web 3.0 era,” significantly expands the subject matter.

Accordingly, politician Akihisa Shiozaki, who was elected to Japan’s House of Representatives last year, has taken the lead on developing Web3 policy recommendations.

Fiscal Reform

Taxes are a significant problem for cryptocurrency in Japan. If digital tokens are listed on an “active market,” such as a significant cryptocurrency exchange, companies that issue them are required to pay taxes on unrealised gains for tokens they hold.

According to the NFT white paper, businesses holding tokens would only be subject to taxation if they sold them for a profit or received money through a transfer.

The Japan Cryptoasset Business Association wants the government to abolish corporate taxes on unrealized capital gains for cryptocurrency issued or held by corporations, tax crypto capital gains at a 20% rate similar to stocks, permit losses to be carried forward for three years, and only tax individuals on their cryptocurrency when they convert it to a fiat currency.

Japan’s Financial Services Agency and METI stated in August that they intended to change the corporate tax laws so that businesses only pay taxes when they make money from the sale of tokens. This is done to allay complaints from token-based businesses that are having trouble finding qualified accounting and auditing services because accounting firms dislike working with cryptocurrencies because there aren’t any established accounting standards or precedents.