- That a payout in foreign currency gives you income in two layers — layer one being the yen equivalent on the day the payout arose, layer two the movement after that, when you convert
- That the default conversion rate is the mid-rate between the telegraphic transfer selling and buying rates (TTM), with revenue at TTB and expenses at TTS available on condition of continuous application for a business giving rise to real estate, business, timber or miscellaneous income (Income Tax Basic Ruling 57-3-2)
- That moving the same foreign currency between deposits recognises no gain, while buying an asset with it is described by the NTA's published Q&A as the point where the amount is realised as an amount to be received under Article 36 of the Income Tax Act
- That where the currency was acquired more than once, the method shown uses an average rate by analogy to Article 118(1) of the enforcement order — which means that without the date and rate at receipt, there is no calculation to build
Key points: quick answers
- Q: I was paid in dollars and converted to yen later. Where exactly does tax attach?
- A: Treat it as two places. The payout itself is computed at its yen equivalent at the time it arose: Article 57-3(1) of the Income Tax Act sets the yen equivalent of a resident's foreign-currency transaction as “the amount converted at the foreign exchange rate at the time the foreign-currency transaction was carried out.” Whatever the currency does afterwards is sorted separately, as an exchange gain or loss distinct from the payout. Which category it falls into and what the figure is are individual determinations — please confirm with your competent tax office or a licensed tax accountant.
- Q: What happens if I never recorded the rate at the time I was paid?
- A: Layer two stops being computable. An exchange gain or loss is measured from what the foreign currency cost you to acquire. The NTA's published Q&A shows, for currency acquired on several occasions, an average-rate method by analogy to Article 118(1) of the Income Tax Act Enforcement Order — but it assumes you know the acquisition dates and rates. Keeping the date and the foreign-currency amount is the part that pays off later.
This article is educational content for people receiving payouts in foreign currency from overseas operators, written by working through the primary sources. It is not tax advice. Your income category, your conversion method and whether you must file at all are individual determinations. Please confirm your own situation with your competent tax office or a licensed tax accountant. The provisions, rulings and statements quoted here were checked on National Tax Agency pages in September 2026; laws, rulings and their administration change.
The same money gets priced twice
Last month a $1,000 payout was confirmed. The rate that day was ¥145 to the dollar. This month you converted those dollars and the rate had moved to ¥153 — so what you had counted as ¥145,000 came out as ¥153,000. It looks like a straightforward win.
That ¥8,000, though, is not payout. What arose as consideration for your affiliate work was the $1,000. The ¥8,000 appeared because the price of a currency moved between the day the payout was confirmed and the day you converted it. It happened somewhere entirely outside the job you did.
In the previous article we pulled apart the rumour that “over a million yen and the tax office finds out,” and showed that the threshold for a bank's record and the threshold for your tax return are different things. This one continues from there and splits the contents of the amount you received. Less dramatic than dismantling a rumour, and far closer to what you actually do each month.
The conclusion first. For someone paid in foreign currency, income comes in two layers.
Merge the two and you end up computing everything at the rate on the day you converted. Here is why that is wrong, in the words of the statute and the ruling.
Layer one — the yen figure on the day the payout arose
The starting point is Article 57-3 of the Income Tax Act (conversion of foreign-currency transactions). The NTA's published Q&A (Japanese) describes the provision this way.
“A foreign-currency transaction means the sale or purchase of assets, the provision of services, the lending or borrowing of money and other transactions for which payment is made in a foreign currency; and where a resident has carried out a foreign-currency transaction, the yen equivalent of the amount of that transaction is the amount converted at the foreign exchange rate at the time the foreign-currency transaction was carried out, on which the amounts of the various categories of that person's income for each year are computed.”
The phrase that decides everything is “at the time the foreign-currency transaction was carried out.” Conversion happens at the moment of the transaction — not at the moment you change the money into yen, and not at the moment you file.
An affiliate payout arises as consideration for “the provision of services.” So the payout converted at the rate on the day it was confirmed is the payout income. Leave the dollars in the account afterwards, watch them appreciate — that figure does not move.
“I haven't converted it to yen yet, so it isn't income yet.” That does not hold. Article 57-3 looks at the time the foreign-currency transaction was carried out, not at whether you converted. As the previous article noted, whether you must file is likewise not decided by whether you moved funds into Japan.
Which rate — TTM, TTB, TTS
“The rate at the time” is not a single number. There is the telegraphic transfer selling rate (TTS), at which a bank sells foreign currency to a customer; the telegraphic transfer buying rate (TTB), at which it buys; and the mid-rate between them (TTM). Which one you use is set by Income Tax Basic Ruling 57-3-2 (Japanese).
“Conversion into yen under Article 57-3(1) of the Act (Conversion of Foreign-Currency Transactions) (excluding conversion where paragraph (2) of that Article applies) shall be at the mid-rate between the customer telegraphic transfer selling rate … and the customer telegraphic transfer buying rate … on the day on which the transaction is to be recorded (in this paragraph, the ‘transaction date’).”
“Provided that, in computing the amounts of real estate income, business income, timber income or miscellaneous income arising from a business generating such income …, on condition of continuous application, sales and other revenue and assets may be converted at the telegraphic transfer buying rate on the transaction date, and purchases and other expenses … and liabilities at the telegraphic transfer selling rate on the transaction date.”
Laid out, that gives you this.
| Item | Default | Proviso, for income from a business |
|---|---|---|
| Sales and revenue (your payout) | TTM (mid-rate) on the transaction date | TTB on the transaction date, on continuous application |
| Purchases and expenses (including cost and losses) | TTM (mid-rate) on the transaction date | TTS on the transaction date, on continuous application |
The proviso is available, in the ruling's own words, when computing “the amounts of real estate income, business income, timber income or miscellaneous income arising from a business generating such income.” And the condition is continuous application. The wording does not contemplate switching each year to whichever method happens to be favourable.
Whose published rate you read is covered too, in Note 1 to the same ruling.
“As for the telegraphic transfer selling rate, the telegraphic transfer buying rate and the mid-rate between them, these shall as a rule be those of the person's principal financial institution; however, where a reasonable rate is used continuously, that is accepted.”
“Continuously” again. Picking whichever published figure suits you from a different bank each month is not the practice the ruling has in mind.
Then there is the case everyone runs into eventually: the money lands on a weekend or a public holiday and there is no rate. Note 3 answers that.
“Where there is no exchange rate on that day, the exchange rate of the nearest preceding day shall be used.”
“Where there are two or more exchange rates on that day, the final rate of that day shall be used (or, where that day is the transaction date, the rate at the time the transaction occurred); provided that, as to the rate on the transaction date, using the final rate of the transaction date is also accepted.”
This ruling has been through a 2025 (Reiwa 7) amendment (Rei-7 Ka-Ko 2-10, Ka-Ho 12-5, Ka-Shin 5-10). Note 2 also leaves room to use monthly average rates and the like when computing income from a business, and any of those choices comes bundled with the continuous-application condition. Take your own conversion method to your competent tax office or a licensed tax accountant. What this article does is show you what the ruling says.
Layer two — what you gain on conversion is a different story
Now the substance. The yen figure was fixed in layer one, on the day the payout was confirmed. So what happens to the dollars that sat in the account, appreciated, and were converted six months later?
Two of the NTA's published Q&A cases draw the boundary. Take first “Treatment of exchange gains and losses on deposits into and withdrawals from foreign-currency deposits (Japanese).” A $10,000 time deposit placed when the rate was ¥100 matures, is withdrawn when the rate is ¥110, and is redeposited at another bank — still in dollars. That is ¥100,000 of unrealised gain.
“There is no need to recognise an exchange gain.”
The reasoning: so long as deposit and withdrawal are made in the same foreign currency there is no change in the amount, and “the position is in substance no different from continuing to hold the foreign currency; treating each such deposit into and withdrawal from a foreign-currency deposit — where there is no substantive change in the state of holding the foreign currency — as a foreign-currency transaction and recognising an exchange gain or loss each time would not match practical reality” (reflecting the purpose of Article 167-6(2) of the Income Tax Act Enforcement Order).
Move dollars around as dollars and, however the price behaves, no taxable income emerges. That is the first line.
The second is “Treatment of exchange gains and losses where a foreign-currency deposit is withdrawn to purchase a building for rental (Japanese).” Here a dollar deposit is withdrawn and a rental building in the United States is bought for $120,000.
“The exchange gain must be recognised as income.”
The reasoning: “because an asset carrying new economic value (its valuation at the time of purchase) has flowed in from outside, what had until then been no more than a valuation difference — the equivalent of the exchange gain or loss — is considered to have been realised as an amount to be received under Article 36 (Amount of Revenue) of the Income Tax Act.”
What the two cases mark out is not a size of sum but whether the state changed. Moving dollars as dollars leaves the state alone. Acquiring something with dollars changes it. Hold that idea up against converting dollars into yen and you can see the shape of the question.
We will not, however, cite a Q&A case on converting to yen here, because we did not find one. Both cases above concern a redeposit and an asset purchase, not a conversion into yen. How your own conversion is treated is a question for your competent tax office or a licensed tax accountant. What this article can say is that the payout income and the exchange gain or loss that follows are handled as separate things in the NTA's own explanations.
An exchange loss probably will not offset your salary
On income categories, let us be straight with you.
Article 57-3 of the Income Tax Act is a provision about how to convert into yen. It is not a provision that assigns an income category. Categories are decided by which of the ten types set out in NTA No.1300, “Outline of income categories” (Japanese), applies. And No.1500, “Miscellaneous income” (Japanese), defines miscellaneous income (雑所得) as income that “falls into none of interest income, dividend income, real estate income, business income, employment income, retirement income, timber income, capital gains and occasional income.”
Explanations treating exchange gains and losses as miscellaneous income are widespread in practice. But the answer can turn on facts such as whether the gain arose incidentally to a business, so this article does not pronounce on the category. Precisely because it cannot be pronounced on, there is one consequence worth holding onto.
“A loss arising in the computation of miscellaneous income cannot be aggregated with the amounts of other categories of income.”
So if the yen rallies and you take an exchange loss, and that loss falls into miscellaneous income, you cannot deduct it from employment income to claw tax back. The treatment is not symmetrical — taxed on the way up, no offset on the way down. Decide to sit on foreign currency having heard only the upside story and there is no exit on the downside.
While we are in No.1500, one more passage bears directly on your bookkeeping.
- Where revenue from business-related miscellaneous income two years prior exceeded ¥3 million, documents relating to cash and deposit transactions must be retained
- Where revenue from business-related miscellaneous income two years prior exceeded ¥10 million, a document setting out total revenue and necessary expenses (a statement of revenue and expenses, for example) must be attached to the return
- Where revenue two years prior was ¥3 million or less, the cash-basis special provision is available (it must be stated on the return that you are using it)
The measure is the year before last. This year's revenue does not set this year's obligation. If you intend to grow from here, making document retention a habit this year is the shorter road.
NTA No.1520, “Financial products similar to savings and tax” (Japanese), lists among the items subject to separate withholding taxation the conversion gain on “a foreign-currency deposit where the principal and interest are to be paid converted into yen or another foreign currency at a rate determined in advance” (for example, exchange gains on a foreign-currency investment account). These are withheld at a flat 20.315% and, it states, need not be aggregated with other income on a tax return. Whether a forward contract is attached changes which door you come in by.
No rate on record, nothing to reconstruct
This is the part we most want you to take away.
Layer two is computed from what the foreign currency cost you to acquire. To find what was gained, you need the original price. And payouts arrive every month, on days with different rates, in different amounts. Twelve times a year, or twenty-four on a twice-monthly schedule. Each one carries its own rate.
How to handle foreign currency acquired across several occasions is shown with worked figures in the NTA's Q&A — in the second half of the building-purchase case.
“Where the foreign currency applied to the purchase of the building was acquired on several occasions, it is appropriate to compute the exchange gain or loss as follows, by analogy to Article 118(1) of the Income Tax Act Enforcement Order (Acquisition Cost of Securities Giving Rise to Capital Gains).”
Rate per dollar held: [¥10,000,000 (deposit A) + ¥5,600,000 (deposit B)] ÷ $150,000 = ¥104
Exchange gain: (¥120 − ¥104) × $120,000 = ¥1,920,000
Deposit A was $100,000 at ¥100; deposit B was $50,000 at ¥112. Averaged across $150,000, that is ¥104 to the dollar. The rate at the building purchase was ¥120, so the ¥16 difference multiplied by the $120,000 used gives ¥1,920,000.
What makes that arithmetic possible is knowing when, at what rate and how many dollars were acquired — all of it. Lose one element and there is no average to take.
The payouts themselves leave traces. They sit in the operator's dashboard. They sit in your bank's transaction history. But the rate on the day is the one thing nothing records for you. Rates are published daily; which day's rate, from which source, you chose to use is something only you can record. And the ruling says a reasonable rate “used continuously” is accepted. Continuity can only be demonstrated by a record.
Try to reconstruct a year of this in February and you stop here. You have the amounts. You have the dates. But you are re-deciding, month by month, which rate to take on what basis — and continuous application is not something you can manufacture after the fact.
Paid in USDT? The framework changes here
Everything above concerns foreign currency. A foreign-currency transaction under Article 57-3 is, as the NTA describes it, a transaction for which payment is made “in a foreign currency.”
If your payouts come in USDT or similar, that framework does not transfer across. Crypto-assets are sorted separately.
The NTA's “Tax treatment of crypto-assets and the related computation statements (December 2025) (Japanese)” explains that profit arising from the sale or use of a crypto-asset is, except where it arises incidentally to an act generating one of the income categories such as business income, as a rule classified as miscellaneous income and requires a tax return.
That page distributes acquisition-cost statements in a “moving-average method” version and a “total-average method” version, and directs you to the total-average version where you are computing from the annual transaction report supplied by a crypto-asset exchange operator.
The further complication is that a stablecoin's treatment can differ according to its status under the Payment Services Act. Reason from “it tracks the dollar, so it is basically dollars,” apply the foreign-currency framework, and everything from the computation method to what you must notify can come out wrong.
What you are receiving, and which legal category it belongs to, is a question for your competent tax office or a licensed tax accountant. This article goes as far as establishing that foreign currency and crypto-assets are sorted under separate frameworks.
What to do today
That was a lot of statute, and the work in front of you fits on a short list.
None of the provisions and rulings in this article decides directly how much you pay. What they decide is what gets counted, and at which day's price. Where there are rules for counting, you need material to count. And the material is only available at the moment the money lands.
Back to the ¥8,000 you gained on conversion. Having noticed it, what to keep is not a note saying “made ¥8,000” but two numbers: received at ¥145, converted at ¥153. The first is an impression. The second is material for a calculation.
On how payouts reach you in the first place, see when and how you get paid; for the shape of the tax return as a whole, the FX affiliate filing guide; and for the groundwork on affiliate income and tax, affiliate payouts and tax, the basics.
Frequently asked questions
[Disclaimer] This article is educational content produced by the Kingfin English Editorial Team and is not tax advice. It sets out a general reading of published statutes, rulings and National Tax Agency pages; it does not determine any individual taxpayer's income category, method of converting foreign currency, timing for recognising exchange gains and losses, or filing obligation. Please confirm your own position with your competent tax office or a licensed tax accountant. The text deliberately does not pronounce on the income category of exchange gains and losses, because Article 57-3 of the Income Tax Act governs the method of conversion into yen rather than income categories, and because the conclusion can turn on individual circumstances. The provisions, rulings and statements quoted were checked in September 2026 against National Tax Agency pages (material relating to Article 57-3, Conversion of Foreign-Currency Transactions; the published Q&A items “Treatment of exchange gains and losses on deposits into and withdrawals from foreign-currency deposits” and “Treatment of exchange gains and losses where a foreign-currency deposit is withdrawn to purchase a building for rental”; No.1300, No.1500, No.1520, No.1900; and Tax treatment of crypto-assets and the related computation statements); laws, rulings and their administration change. English renderings of Japanese provisions and rulings are ours and are provided for understanding, not as official translations. The $1,000, ¥145 and ¥153 used at the opening are an illustration, not real rates and not any particular result. Separately, OlympTrade, promoted through Kingfin's affiliate programme, is an FX and binary-options trading service and is not registered as a financial instruments business operator in Japan. Trading always carries the risk of losing your principal, and no outcome can be guaranteed. Affiliate results and payout amounts are likewise not guaranteed and vary between individuals.
