Taxation rules for foreign currency deposits and FX trading

Taxation rules for foreign currency deposits and FX trading in Japan distinguish between interest income and exchange gains. Interest earned from foreign currency deposits at domestic financial institutions is subject to withholding tax at a rate of 20.315 percent, which completes the tax obligation.

In contrast, exchange gains—realized when converting foreign currency back to yen or exchanging one foreign currency for another—are generally classified as miscellaneous income. This requires individuals to file a final tax return if their total miscellaneous income exceeds 200,000 yen. Even if a tax return is not required for income tax, local inhabitant tax must still be reported to municipalities.

For FX trading, profits are also categorized as miscellaneous income. If annual profits exceed 200,000 yen, a final tax return is mandatory. Notably, filing a return for FX trading allows investors to carry forward losses for up to three years to offset future profits.