A senior lawmaker from Japan’s ruling Liberal Democratic Party has called for easing the country’s strict cryptocurrency leverage rules, saying the current 2x limit is too restrictive and is harming the health of the domestic market.

Seiji Kihara, chair of the LDP’s Next-Generation AI and On-Chain Finance Project Team, told a financial summit in Tokyo that adequate liquidity and an effective price-formation mechanism are essential for the development of the crypto market. He also described deregulation as an unavoidable trend. According to a July 27 report by Nikkei, Kihara said Japan’s existing leverage ceiling has restrained trading activity and helped drive capital away from Japanese trading venues. He urged policymakers to consider reforms that would help restore the country’s competitiveness.

Kihara’s position is based on the view that Japan’s cautious margin rules have left domestic exchanges at a structural disadvantage compared with global competitors. He argued that the current framework limits both price discovery and market depth. Relaxing leverage restrictions, in his view, could help bring trading volume back to Japanese platforms while signaling to international investors that Tokyo is prepared to support deeper crypto capital formation.

The lawmaker also said attracting overseas funds is a central objective of his project team’s current work. That framing suggests leverage reform is being treated not only as a technical adjustment to trading rules, but also as part of a broader financial policy agenda aimed at strengthening Japan’s position in digital assets. Because leverage allows traders to open positions larger than their posted collateral, any discussion of higher limits also touches directly on risk controls, liquidation rules and customer protection standards.

Implications for Japan’s Crypto Competitiveness

The call for deregulation represents a notable change in tone for a jurisdiction that has historically emphasized consumer protection, particularly after early cryptocurrency exchange failures. Japan’s regulatory framework is often viewed as one of the most structured in the world, but policymakers appear increasingly concerned that excessive caution may be pushing activity toward jurisdictions with more permissive rules.

Kihara’s comments indicate that leverage limits are likely to become a key topic in upcoming policy discussions as the LDP works to improve the global standing of Japan’s domestic crypto industry. For market participants, any proposed changes would raise practical questions about where new leverage thresholds might be set and how investor protections would be maintained alongside greater trading flexibility.

If such reforms move forward, Japan could shift from a primarily defensive regulatory posture toward one that more actively competes for crypto market share through structural liberalization. The months ahead will show whether Kihara’s description of deregulation as an “unavoidable trend” develops into concrete legislative action or remains part of the party’s wider digital asset policy roadmap.