The Supreme Court issued its first ruling holding that income tax may be imposed on foreign-exchange gains, calculated in yen, arising when one foreign currency is exchanged for another. As foreign-currency-denominated assets grow popular amid the yen's depreciation, the ruling is expected to affect tax practices going forward.
Interest in foreign-currency-denominated assets is growing as the yen continues to depreciate. Interest income from foreign-currency deposits and gains from their sale have been taxable as before, but the range of situations subject to taxation may expand.
The Supreme Court issued its first ruling that imposing income tax on foreign-exchange gains, calculated in yen, arising when one foreign currency is exchanged for another is lawful. The ruling indicates that the treatment of such transactions in tax filings may change in some respects.
According to Bank of Japan statistics, individual foreign-currency deposit balances held at domestic banks totaled approximately ¥6.9 trillion as of the end of July 2026.
To prevent filing errors and omissions caused by insufficient understanding of the tax rules, holders of foreign-currency-denominated assets are expected to understand the situations in which they may be subject to tax.