There are many rumors about overseas forex trading, such as "You don't pay taxes on overseas forex," "It's dangerous, so you should stay away," and "You can use leverage up to 1,000 times."The first two are inaccurate, but the last one is true. Profits from overseas forex trading are taxed (in fact, it's disadvantageous for high-income earners), whether it's dangerous or not depends on the broker's judgment, and high leverage is a fact.
The fundamental difference between overseas and domestic forex trading lies in one point: "whether it is inside or outside the regulations of Japan's Financial Instruments and Exchange Act."This article presents an overview with a comparison table of 13 items, and then,based on legal provisions and official statistics,provides a neutral explanation of which to choose, the point at which tax burdens reverse, and points to note when using both.
Conclusion | Differences between overseas and domestic forex trading (as of September 2026)
- Domestic FX = within regulations: maximum leverage of 25x, margin calls possible, trust protection mandatory, flat tax rate of 20.315% + loss carryforward for 3 years. Both protection and restrictions are determined by law.
- Overseas Forex = Outside of Regulation: High leverage, no margin calls (zero cut), and abundant bonuses. However, protection depends on the broker, taxes are subject to comprehensive taxation (approximately 15-56%), and losses cannot be carried forward.
- Taxes become more favorable for domestic FX trading once taxable income reaches approximately $20,625(approximate; see breakpoint table in the main text). Profits and losses from overseas FX and domestic FX cannot be offset against each other.
- The choice between the two depends on four questions: "funding, leverage, taxes, and self-management"(see the decision framework in the main text). Using both in combination, with a division of roles, is also an option.
- Overseas forex trading is not registered with Japan's Financial Services Agency (FSA) and falls outside the scope of protections that the FSA warns against.If you do use it, the premise is to "only trade with an amount you can afford to lose and with a trustworthy broker."
Quick Reference Chart of Differences Between Overseas and Domestic Forex Trading (13 Items)
First, we've listed the differences between domestic and overseas forex trading in 13 points. You can jump to the detailed section from the row that interests you
| item | Overseas FX | Domestic FX |
|---|---|---|
| Registered with the Financial Services Agency of Japan | None (Not registered. Many are listed on the warning list.) | Yes (Type 1 Financial Instruments Business Operator) |
| Leverage | Hundreds of times to unlimited (set freely by the broker. Example: XM offers a maximum of 1,000 times leverage - officially confirmed in September 2026) | Maximum leverage of 25 times (margin requirement of 4%, Cabinet Office Ordinance Article 117) |
| Margin call (debt risk) | None — Zero-cut policy limits maximum loss to the deposit amount (for normal trading within the terms and conditions) | Yes—it is the legal obligation of the business to charge for any shortfall |
| Stop-loss level | Low margin (e.g., TitanFX forces liquidation at a margin of 20%) | Strict (e.g., DMM FX issues a margin call if the margin ratio falls below 100%, and forced liquidation if it is not resolved by the deadline) |
| Protection of funds | It depends on the rules of the company and the country of origin (mostly just separate sorting and management) | Trust protection is mandatory(money trusts; approximately 1.95 trillion yen will be protected by trusts as of the end of July 2026 - FFAJ announcement). |
| spread | Wider range (some account types have a 0.0 pips + commission model) | Narrower range (e.g., USD/JPY 0.2 sen fixed in principle *applicable only during limited time periods, with exceptions) |
| Bonus Cashback | Abundant (account opening and deposit bonuses, cashback culture) | Limited (mainly conditional cashback) |
| Trading Tools | MT4 and MT5 are standard (EAs and automated trading are freely available) | Our tools are primarily developed in-house |
| Number of currency pairs | A large amount (e.g., XM is 50 or more - official figures as of April 2026) | Approximately 20-34 (GMO Click 24, DMM 20, SBI FX Trade 34) |
| tax | Comprehensive taxation (approximately 15-56%, progressive rate combined with income) and loss carryforward is not permitted | Taxation by separate declaration (flat rate of 20.315%) and loss carryforward for 3 years |
| Offsetting profits and losses | It is not possible to combine overseas FX and domestic FX transactions (the tax frameworks are separate. This is due to the structure of National Tax Agency No. 1521 and Article 41-14 of the Special Measures Law, making it impossible in both directions). | |
| Deposits and withdrawals | Cards, online wallets, cryptocurrencies, etc. (Subject to change under the revised Payment Services Act of 2026) | Instant and fee-free transactions are the norm at domestic banks |
| Where to seek help in case of trouble | Business support - Financial Commission (member businesses only). Public bailout in Japan cannot be expected | Financial ADR, consultation services by the Financial Services Agency, and legal and regulatory oversight |
*This article was created by the MoneyCharger editorial teamtheir content creation policy. The laws and regulations are based on the current articles of the e-Gov Law Search (Financial Instruments and Exchange Act Articles 39 and 43-3, Cabinet Office Ordinance concerning Financial Instruments Business, etc. Articles 117 and 143, Special Taxation Measures Act Article 41-14), taxes are based on the National Tax Agency's Tax Answer (No. 1521, No. 2260, No. 1523, No. 1900) and cryptocurrency FAQs, statistics are based on materials published by the Financial Futures Association of Japan, and company specifications are based on values published on the official websites (the date of confirmation is specified in the text), all confirmed on September 4-5, 2026. Overseas FX brokers are not registered with the Japanese Financial Services Agency, andthe Financial Services Agencyandthe Consumer Affairs Agencyhave issued warnings about transactions with unregistered brokers. The tax figures are general estimates, and individual tax declarations should be confirmed with a tax accountant or tax office. This article provides general information and does not endorse the use of any specific broker.
If you are new to overseas forex trading,our complete guide for overseas forex trading beginners.
Supervisor of this article
Japan Securities Dealers Association Class 1 Securities Sales Representative
Ryota Ito
While a student,CFPand DC Advisor qualifications. I currentlya Class 1 Securities Sales Representativelicense. Subsequently, I worked in the sales and management planning departments of a securities company, and as a president's secretary (during which time I was involved in the sale of investment trusts and stocks, seminar planning, launching an FX business, and establishing an investment advisory company). I also worked in investment banking. In November 2007, I established Skiller Japan Co., Ltd. and became a director. I am currently working as a part-time lecturer at Toyo University's Faculty of Business Administration, Otemae University's Correspondence Education Department, Chiba Institute of Science's Faculty of Crisis Management, and as a financial planner.
Differences in Operation and Regulation | It all starts with "Is it inside or outside of Japanese regulations?"
While you could list 10 or even 20 differences between overseas and domestic forex brokers, the essence boils down to just one thing: "Whether they operate within or outside the regulations of Japan's Financial Instruments and Exchange Act."Leverage, zero-cut, trust protection, and taxes all stem from this single point.
The deciding factor is not the "base of operations" but "registration in Japan."
Simply put,"overseas FX" is a general term for "FX brokers that provide services from overseas without being registered with the Japanese Financial Services Agency." The dividing line is not the company's location, butwhether or not it is registered in Japan (Type 1 Financial Instruments Business Operator). Even if a foreign company has its headquarters overseas, if its Japanese subsidiary is registered, it is included in "domestic FX" and Japanese regulations apply in full. Conversely, opening an overseas account (an overseas FX account) means directly contracting with a broker that is outside of Japanese regulations.
Set of regulations applicable to domestic FX (with articles of law)
Domestic FX brokers registered with the Financial Services Agency are legally required to follow the following set of rules
Main regulations on domestic FX trading (e-Gov current regulations, confirmed September 4, 2026)
- Leverage up to 25 times– Individuals are required to maintain a margin rate of 4% or more (Article 117, Paragraphs 7 and 8 of the Cabinet Office Ordinance concerning Financial Instruments Business, etc.). The Financial Services Agency also officially states that "when converted to leverage, it is 25 times or less."
- It is the broker's obligation to request additional margin calls—the act of "continuing the contract without requiring a deposit for the deficit" is prohibited if the margin becomes insufficient (Article 117, Paragraph 1, Items 27 and 28). Brokers have no discretion to exempt clients from requesting additional margin calls.
- Trust protection is mandatory—customer funds must be managed separately from the company's own assets (Financial Instruments and Exchange Act, Article 43-3), and margin for over-the-counter FXmust be consolidated into a money trust with a trust bank, etc.(Financial Instruments Business Ordinance, Article 143; fully applicable from 2010). Even if the company goes bankrupt, customer funds will be protected as trust assets.
- Compensation for customer losses is prohibited—Article 39 of the Financial Instruments and Exchange Act. This is the legal reason why "there is no zero-cut system in domestic FX" (details below).
Overseas forex trading is "unregistered"—not illegal, but outside the scope of protection
Because overseas forex brokers are not registered in Japan, none of the above regulations apply to them. This is why they can offer high leverage, zero-cut protection, and generous bonuses, but theyare not required to provide protections such as trust protection(fund management depends on the rules of the broker and their country of origin, and in most cases it is limited to segregated accounts).
Please make sure you understand the legal aspects accurately.It is not illegal for users to use overseas forex trading of their own free will. The Financial Instruments and Exchange Act regulates unregistered brokers that solicit Japanese residents. However, the Financial Services Agency has issued warnings about unregistered brokers, citing examples of problems such as "refusal of withdrawals," "exorbitant withdrawal fees," and "sudden inability to contact them," and many overseas forex brokers are listed on the unregistered warning list."Not illegal" and "protected" are two different things—this distinction is key to a correct understanding of overseas forex trading (see the article "Is Overseas Forex Trading Illegal?").
Legal reasons why zero cut is not available in Japan
The reason why domestic FX brokers require margin calls while overseas FX brokers do not can also be explained by whether or not regulations are in place. In Japan, Article 39 of the Financial Instruments and Exchange Act prohibits brokers from compensating customers for their losses , and it is generally understood that zero-cut, where brokers cover losses exceeding the account balance (i.e., customer debt), cannot be offered. There have been actual cases where domestic securities companies that compensated customers for their losses received recommendations from the Securities and Exchange Surveillance Commission (for violating Article 39). Zero-cut in overseas FX brokers is a service that each company provides as part of its terms and conditions, outside of these regulations. The mechanism and conditions for each broker are explained in detail from the relevant articles in our article explaining no margin calls and zero-cut in overseas FX brokers
The high leverage and zero-cut features in overseas forex trading aren't because the brokers are being generous. They're only possible because they're outside of Japanese regulations, and conversely, they don't receive Japanese protection either—the benefits and risks are two sides of the same coin. Understanding this will make all the subsequent differences much easier to grasp
Differences in Trading Environments | Leverage, Spread, Trading Methods, and Tools
The differences you experience in daily trading are built upon the foundation of whether or not you're trading within or outside of regulations.Roughly speaking, "overseas FX is for aggressive trading, while domestic FX is for cost and stability.
Leverage | Inside and Outside the 25x Limit
The maximum leverage of 25x for domestic FX is a consequence of Article 117 of the Cabinet Office Ordinance, which mandates a minimum margin rate of 4% for individual traders (the Financial Services Agency also officially states that "the leverage is 25 times or less"). There is no such regulation for overseas FX, andbrokers are free to set leverage from several hundred times to unlimited(e.g., XMTrading has announced a maximum leverage of 1,000 times; confirmed on their official website on September 5, 2026).
Comparing with a margin of approximately $625.00, domestic FX allows you to hold a position worth a maximum of approximately $15,625, while overseas FX with 1,000x leverage allows you to hold a position worth a maximum of approximately $625,000. The biggest advantage of overseas FX is that you can make large trades with a small amount of capital, but this also amplifies the impact of price fluctuations (for normal trading within the terms and conditions, losses are limited to the deposit amount with zero-cut—see the article on no margin calls and zero-cut for details ). The mechanism of leverage and comparisons of brokers are explained in detail in the overseas FX leverage comparison article
Spread | It's true that "domestic spreads are narrow," but with conditions
Domestic FX brokers have an advantage in terms of transaction costs.Major domestic brokers offer a "fixed" spread of around 0.2 yen for USD/JPY(GMO Click Securities 0.2 yen, DMM FX 0.2 yen, SBI FX Trade 0.18 yen, as of September 2026). However, this "fixed" spreadlimited to core trading hours from 9 AM to early morning the following day, and will widen in the early morning or when important economic indicators are released. Each company clearly states this, so it is not "0.2 yen at all times, 24 hours a day."
Standard accounts with overseas forex brokers generally have wider spreads (our measurements show a wide range of 0.9 to 3.0 pips for USD/JPY, depending on the broker), but many brokers also offer low-spread accounts (0.0 pips or less + trading fees) , so the cost difference can be narrowed by choosing the right account type. For a detailed comparison of brokers and account types, please see our overseas forex spread comparison article
Differences in trading methods (DD/NDD) — the background of spread differences
The difference in spreads is due to the trading method. The mainstream method for domestic FX is the DD method (over-the-counter/OTC trading) , where the broker receives customer orders and adjusts risk through cover transactions. Because this structure includes the possibility that customer losses can become the broker's profit, it is easier for them to have revenue sources other than spreads and can offer narrow spreads. The NDD method promoted by overseas FX brokers is based on the premise that orders are routed to the market, and the revenue sources are spreads and commissions. Details of the methods and "the truth and lies of NDD" are covered in the NDD broker list and review article
Bonuses, trading tools, and number of currency pairs
Other differences in the trading environment
- Bonuses– In overseas forex trading, account opening bonuses, deposit bonuses, and cashback are well-established practices. In Japan, due to regulations and differences in business models, conditional cashback is the norm (seebonus ranking article).
- Trading Tools– Overseas forex brokers typically use MT4/MT5 as standard, allowing free use of EAs (Expert Advisors) and custom indicators. Domestic brokers primarily use their own proprietary tools, with MT4 support limited to certain brokers (see article on MT4-compatible brokers).
- Number of currency pairs– Domestic platforms have around 20-34 pairs (GMO Click 24, DMM 20, SBI 34, officially published figures), while overseas platforms have a larger number, including minor currencies (XM publishes over 50 pairs as of April 2026). Overseas platforms also have an advantage in the breadth of CFD instruments, such as gold and stock indices.
The difference between margin calls and stop-loss orders | How the "risk of debt" is placed changes
When the market changes drastically and a stop-loss order isn't executed in time, resulting in a negative account balance—this is where the biggest difference between overseas and domestic forex trading becomes apparent.In domestic forex trading, the negative balance is charged as a "shortfall" (margin call), while in overseas forex trading, it's reset with a zero-cut.
Margin calls in domestic FX trading are a reality | Statistics published by the association
It's often thought that margin calls rarely occur with 25x leverage, but the Financial Futures Association of Japan publishes data on the occurrence of "uncollected receivables due to stop-loss orders, etc." during sudden market fluctuations.In the Swiss franc shock of January 2015, approximately 3.3 billion yen (approx. $550,000) in uncollected receivables (liabilities incurred by customers to brokers) were generated in 1,229 cases in a single day (of which approximately 1.9 billion yen (approx. $300,000) was 1,137 cases involving individuals, averaging approximately $10,688 per case). Similar situations occurred during the flash crash of 2019 (approx. $5,875,000) and the sharp decline of the Turkish lira in 2021 (approx. $8,625,000). Official statistics confirm that margin calls are a realistic risk in domestic FX trading.
Zero-cut in overseas forex trading: Maximum loss is limited to the deposit amount. However, conditions apply
Zero-cut in overseas forex trading is a system where the broker covers any losses and resets the balance to zero. For normal trading within the terms and conditions, the maximum loss is limited to the deposit amount. However, it is not unconditional. Trading deemed to be abuse, such as hedging based on the assumption of zero-cut or abuse of bonuses, is excluded. Some brokers guarantee zero-cut in their terms and conditions, while others only provide official announcements, and the timing of execution also differs from broker to broker. Furthermore, since zero-cut is a system where the broker bears the losses, it is contingent on the broker's ability to pay . For a comparison of the terms and conditions of 8 companies and the reasons why it is called a "trap," please see our article explaining no margin calls and zero-cut , and for general information on debt risks in overseas forex trading, please see Cases and countermeasures for incurring debt
Differences in stop-loss levels
There are also differences in the levels at which forced stop-loss orders are triggered. Domestic FX brokers have strict management of margin maintenance ratios; for example, DMM FX has a system in place where a margin call is issued if the maintenance ratio falls below 100% (Article 11 of their terms and conditions). Many overseas FX brokers set lower levels; for example, TitanFX officially states that a margin call occurs at a 90% maintenance ratio and forced stop-loss occurs at 20% . The lower the level, the longer you can maintain your position, but the less margin remains after a stop-loss. The calculation methods and the levels of each company are covered in detail in the stop-loss explanation article
To summarize,with domestic FX, "broker risk is small, but you bear the risk of debt in case of sudden changes," while with overseas FX, "the broker bears the risk of debt, but you manage the broker risk yourself." The difference is that the risk doesn't disappear, but where it resides changes.
Tax Differences | A Flat 20.315% Tax in Japan versus Comprehensive Taxation Overseas—The Turning Point Where Taxes Reverse
The idea that "overseas forex trading is tax-free" is a misconception; profits from overseas forex trading are, of course, taxable.The real difference lies in the tax system. Domestic forex trading is subject to a flat 20.315% separate taxation regardless of profit amount, while overseas forex trading is subject to comprehensive taxation (progressive) where the tax rate is determined by combining it with other income such as salary.This difference can be advantageous or disadvantageous depending on your income level.
Why are there different tax treatments for the same FX? | Reasons based on the law
The 20.315% tax rate on domestic FX (15% income tax + 0.315% reconstruction special income tax + 5% local inhabitant tax) is based on Article 41-14 of the Special Taxation Measures Act, "Special provisions for taxation of miscellaneous income, etc., related to futures transactions." This articleexplicitly states that for over-the-counter (OTC) FX, the application is "limited to transactions conducted with financial instruments business operators or registered financial institutions as counterparties." Transactions with overseas FX brokers not registered in Japan are not subject to this special provision andmiscellaneous income subject to comprehensive taxation. The National Tax Agency also states in a note to Tax Answer No. 1521 that OTC derivative transactions with parties other than financial instruments business operators or registered financial institutions "are not subject to separate taxation, but are treated as (Note 1)" (Note 1 = comprehensive taxation as miscellaneous income) (confirmed September 4, 2026).
| Domestic FX | Overseas FX | |
|---|---|---|
| Taxation method | Separate taxation (miscellaneous income, etc., from futures trading) | Comprehensive taxation (miscellaneous income) |
| tax rate | Flat rate 20.315%(income tax 15% + reconstruction 0.315% + resident tax 5%) | Approximately 15% to 56%(Income tax 5-45% x 1.021 + local tax 10%. Determined by taxable income including other income such as salary.) |
| Offsetting profits and losses | It is permissible within the category of "miscellaneous income related to futures trading" (exchange-traded FX, Nikkei 225 futures, commodity futures, securities CFDs, etc.) | It is permissible within the scope of miscellaneous income subject to comprehensive taxation (other miscellaneous income such as overseas forex trading and affiliate marketing).It cannot be offset against salary income, etc. |
| Total of domestic FX and overseas FX | It is not possible(separate taxation and comprehensive taxation are different categories. Based on the structure of National Tax Agency No. 1521 and Article 41-14 of the Special Measures Law, it is not possible in either direction). | |
| Loss carryforward | for three years from the following year(provided that tax returns are filed consecutively). | It cannot be carried over(it is discarded in the same year). |
The point at which the tax burden reverses: Taxable income of approximately $20,625 is the threshold
We will calculate "at what point overseas forex trading becomes unfavorable in terms of taxes" based on the figures in the regulations. The tax rate added to profits from overseas forex trading is "marginal income tax rate × 1.021 (special reconstruction income tax) + 10% local inhabitant tax". Comparing this to the 20.315% for domestic forex trading, it looks like this:
| Taxable income (total including salary, etc., after deductions) | The tax rate (marginal tax rate) added to profits from overseas forex trading | Comparison with domestic FX (20.315%) |
|---|---|---|
| ~approximately $12,181 | Approximately 15.1% (5% income tax) | Overseas forex trading is advantageous |
| 1.95 million to approximately $20,619 | Approximately 20.21%(income tax 10%) | Almost even(with a slight advantage for overseas teams) |
| 3.3 million to approximately $43,431 | Approximately 30.42%(income tax 20%) | Domestic FX trading gains an advantage |
| 6.95 million to approximately $56,244 | Approximately 33.5% (income tax 23%) | Domestic FX is advantageous |
| 9 million to approximately $112,494 | Approximately 43.7% (income tax 33%) | Domestic FX is significantly more advantageous |
| Approximately $112,500 or more | Approximately 50.8-55.9% (income tax 40-45%) | Domestic FX is significantly more advantageous |
*The tax rate was calculated by our editorial department using the National Tax Agency's Tax Answer No. 2260 quick calculation table (income tax 5-45%) × reconstruction special income tax 2.1% + standard local inhabitant income tax rate of 10%. "Taxable income" is not annual income, but the amount after deducting income deductions such as employment income deduction and basic deduction (for company employees, it is the amount after deducting the total of income deductions from the "amount after employment income deduction" on the withholding tax statement). The tax rates in the table are "the tax rate applied to an additional approx. $0.01 in that range," so the average tax rate when FX profits cross tax rate ranges will be slightly lower than this. Local inhabitant tax varies slightly depending on the municipality, and there will be individual differences due to various deductions, so this is just an estimate
The conclusion is simple: when your combined taxable income from salary and FX profits exceeds approximately $20,625, domestic FX becomes more advantageous in terms of taxes (below approximately $20,625, overseas FX is slightly more advantageous or equal). The structure where "the more you earn, the heavier the tax burden becomes with overseas FX" and the availability of a 3-year loss carryforward are the biggest advantages of domestic FX in terms of taxes. Details of the calculations and tax saving strategies are explained in the overseas FX tax guide
The "approx. $1,250 rule" and points to note regarding local taxes
For company employees receiving a salary from only one source, if the total income other than salary and retirement income is approximately $1,250 or less per year, an income tax return is not required (National Tax Agency No. 1900). However, this "approximately $1,250 rule"applies only to income tax; there is no exemption for local taxes. Please note that even if your income is approximately $1,250 or less, you will still need to file a separate local tax return with your city or town (as clearly stated on the official websites of municipalities such as Yokohama City).
The statement in many explanations, including older versions of this article, that "domestic FX profits and losses can be offset against cryptocurrency (crypto assets) profits and losses"incorrect. The National Tax Agency's FAQ on crypto assets clearly states that "there is no separate taxation on margin trading of crypto assets, and it is subject to comprehensive taxation," and Article 41-14 of the Special Taxation Measures Law also explicitly excludes crypto asset-related derivatives from its scope. Only profits within the category of "miscellaneous income, etc. related to futures trading," such as exchange-traded FX, Nikkei 225 futures, commodity futures, and securities CFDs, can be offset against domestic FX profits and losses.
Differences between deposits and withdrawals and regulatory changes in 2026
Domestic FX brokers have a clear advantage when it comes to deposits and withdrawals . Most domestic brokers support instant deposits via online banking and withdrawals to domestic banks, and fees are generally free. Overseas FX brokers combine credit cards, online wallets such as bitwallet, cryptocurrencies, and domestic bank transfers, and the rules vary from broker to broker, with some having unique rules such as "withdrawals are limited to the same method and amount as the deposit."
Furthermore, 2026 marks a turning point in the deposit and withdrawal environment. On June 1, 2026, the revised Payment Services Act came into effect, regulating cross-border payment collection services that have been used for deposits and withdrawals in overseas forex trading . In its response to public comments, the Financial Services Agency (FSA) has clearly stated that it will not allow those who operate payment collection services for unregistered overseas forex brokers to register as money transfer businesses, and deposits and withdrawals via domestic bank transfers are expected to decrease. There is a six-month grace period after the law comes into effect (until November 30, 2026), so the full impact is expected to be after the grace period ends, but some brokers have already begun to suspend domestic bank transfers or switch to cryptocurrency withdrawals. Details of this regulation and the responses of each company are being compiled as they become available in our articles on overseas forex withdrawal refusals and withdrawal troubles
If you're using overseas forex brokers,approach to choosing deposit and withdrawal methods is not just whether they're currently available, but also whether they're likely to remain available after regulations are implemented. It's reassuring to have multiple deposit and withdrawal options, including wallets like bitwallet and cryptocurrency transfers.
Which one should you choose? | Decide with these 4 questions
There's no single right answer to the question, "Which is better, overseas forex trading or domestic forex trading?"While the internet is flooded with articles promoting overseas forex and domestic forex, the best optionyour capital, goals, income, and self-management style. Please consider the following four questions to help you decide.
- capital—a few thousand yen to approximately $625.00—and limit your losses to your initial deposit, then overseas forex trading (zero cut) is an option. If protecting a substantial amount of capital is your top priority, then domestic forex trading, which mandates trust protection, is a better choice.
- Leverage—is 25x sufficient? If your strategy relies on high leverage, overseas forex is the only option; if not, the narrow spreads of domestic forex can be advantageous.
- Taxes– If your taxable income, including salary, exceeds approximately $20,625, domestic FX trading is more advantageous in terms of tax burden (seethe break-even point table). If your income is lower, overseas FX trading, even with comprehensive taxation, is unlikely to be disadvantageous.
- Self-management– Can you check the terms and conditions and deposit/withdrawal rules of overseas brokers yourself and accept that "you are responsible for any problems"? If you want to trade within the framework of public protection, then domestic FX is better.
Who is suited to overseas forex trading and who is suited to domestic forex trading?
| Who is suited to overseas forex trading? | Who is suited to domestic FX trading? |
|---|---|
| I want to aim for big returns with a small amount of capital (high leverage x zero cut to limit losses to the deposit amount in principle) | Prioritizing the security of funds (Registered with the Financial Services Agency, Trust Protection, Financial ADR) |
| I want to use MT4/MT5 or automated trading (EA) | We prioritize narrow spreads, stable execution, and the clarity of yen-denominated transactions |
| I want to use bonuses and cashback as trading funds | Taxable income, including salary, is high, and the flat 20.315% tax rate and the 3-year loss carryforward benefit are significant |
| I can tolerate the effort of checking the terms and conditions and deposit/withdrawal rules myself | We prioritize the speed and reliability of deposits and withdrawals |
a more in-depth comparison of the advantages and disadvantages of overseas forex tradingsee "A Thorough Explanation of the Advantages and Disadvantages of Overseas Forex Trading," and for an examination of why it is considered dangerous,"Why is Overseas Forex Trading Not Recommended?".
Rather than a simplistic dichotomy of "safe domestically, dangerous overseas," it's more practical to consider "what risks you want to take and what you want to avoid." If you want to eliminate debt risk even at the expense of broker risk, then overseas forex is the way to go; if you want to eliminate broker risk, then domestic forex is the way to go—the only difference is where you place your risk
The option of "using both" overseas and domestic forex trading
You don't have to choose between the two;having accounts in both ("combining") is a practical option that is actually widely used. However, there are significant tax pitfalls, so be sure to understand both the advantages and points to watch out for.
Benefits of using both methods: Role sharing and risk diversification
Three benefits of using them together
- You can divide the roles—you can use a lump sum for stable investment in domestic FX, and only put an amount you can afford to lose into overseas FX for aggressive trading with small amounts and high leverage. With normal trading, losses are capped at the deposit amount (zero cut), so you can fix the upper limit of your aggressive trading beforehand.
- Diversifying broker risk—don't concentrate your funds in one company. This is the simplest and most effective measure against withdrawal problems and broker-related risks on the overseas forex side.
- Differentiating between trading methods and instruments—for example, using overseas for high-leverage trading of EAs and gold, and domestically for low-spread day trading of USD/JPY—allows you to choose the right tool for the job.
The most important point to note when using both: Profits and losses cannot be combined (summarized)
One crucial point to understand when using both is thatprofits and losses from overseas forex trading and domestic forex trading cannot be combined for tax purposes. Overseas forex trading is classified as miscellaneous income subject to comprehensive taxation, while domestic forex trading is classified as "miscellaneous income related to futures transactions, etc." subject to separate taxation. Based on the structure outlined in National Tax Agency Tax Answer No. 1521 and Article 41-14 of the Special Taxation Measures Law, profits cannot be combined in either direction (confirmed September 4, 2026).
For example,if you have a loss of approximately $3,125 from overseas forex trading and a profit of approximately $3,125 from domestic forex trading, even though your net profit is zero, approximately $637.50 (20.315%) will be taxed on the profit of approximately $3,125 from domestic forex trading. The loss of approximately $3,125 from overseas forex trading cannot be deducted from the profits from domestic forex trading, nor can it be carried over to the next year, so it is forfeited in that year. "Even though you haven't lost money overall, you still have to pay taxes" is a typical pitfall of using both forex trading.
How to differentiate between filing tax returns when using both methods
While you can file your tax return using a single form, profits from overseas forex trading are classified as "miscellaneous income (comprehensive taxation)," and profits from domestic forex trading are classified as "miscellaneous income related to futures trading, etc. (separate taxation) ." It's crucial not to mix them up. Also, money received in connection with trading, such as cashback from MoneyChat, can generally be declared as miscellaneous income. If you're unsure about specific reporting methods or how to determine classifications, we recommend consulting a tax accountant, especially if the amount is large, while referring to the overseas forex tax guide
＼ You can lower trading costs through cashback programs when using an overseas forex account ／
Frequently Asked Questions about the Differences Between Overseas Forex and Domestic Forex
What is overseas forex trading?
This is a general term for brokers that provide FX services from overseas without being registered with the Japanese Financial Services Agency. Because they are not subject to Japanese regulations (such as 25x leverage, trust protection obligations, and prohibition of loss compensation), they can offer high leverage, zero cuts, and generous bonuses, but they are not protected by the Japanese system. Even if the head office is overseas, if it is registered in Japan, it is classified as "domestic FX"
Is it illegal to use overseas forex brokers?
It is not illegal for users to use overseas forex trading of their own free will. The Financial Instruments and Exchange Act regulates unregistered brokers that solicit Japanese residents, and it is understood that there are no provisions to punish users. However, many overseas forex brokers are listed on the Financial Services Agency's unregistered warning list, and in the event of trouble, they will not be protected by the Japanese system. For more details, please seethe explanatory article "Is Overseas Forex Trading Illegal?".
Why is it often said that you should "stay away" from overseas forex trading?
Many searches advise against overseas forex trading, mainly because it falls outside the scope of Japanese protection. The Financial Services Agency (FSA) has issued warnings about unregistered brokers, citing examples of problems such as "refusal of withdrawals," "exorbitant withdrawal fees," and "sudden loss of contact," and it is true that there are fraudulent brokers operating without any real substance. On the other hand, there are also large, established companies that have been operating for many years, so it's not a case of "all is dangerous" or "all is safe"; it all comes down to discerning the right broker. Please also see our article examining the reasons why it's not recommended, along with our safety ranking and evaluation criteria
Can losses from overseas forex trading and domestic forex trading be offset against each other?
No, you cannot. Overseas FX is considered miscellaneous income subject to comprehensive taxation, while domestic FX is considered "miscellaneous income related to futures trading, etc." subject to separate taxation, so the tax frameworks are different. Domestic FX can be offset against each other, as well as against Nikkei 225 futures, commodity futures, and securities CFDs, and overseas FX can also be offset against other miscellaneous income subject to comprehensive taxation (such as affiliate income) within the tax bracket. However, margin trading in crypto assets is subject to comprehensive taxation and cannot be offset against domestic FX (as clearly stated in the National Tax Agency's crypto asset FAQ)
Which is cheaper in terms of taxes: overseas forex trading or domestic forex trading?
It depends on your income. If your taxable income, including salary, is approximately $20,625 or less, overseas FX (comprehensive taxation) is comparable or slightly more advantageous. If it exceeds approximately $20,625, domestic FX with a flat rate of 20.315% becomes more advantageous, and the difference widens as your income increases (overseas FX can reach up to approximately 56% including the special reconstruction income tax). In addition, domestic FX is advantageous because losses can be carried forward for three years. Please check the break-even point table in the main text
What happens to my tax return if I use both methods?
On a single tax return, overseas forex trading is declared as "miscellaneous income (comprehensive taxation)," and domestic forex trading is declared as "miscellaneous income, etc., related to futures trading (separate taxation)." Since profits and losses cannot be combined, even if one is a loss, the profit from the other will still be taxed. Company employees are required to file a tax return if their income exceeds approximately $1,250
At what profit level do I need to file a tax return?
Employees receiving a salary from only one source are required to file an income tax return if their total income other than salary exceeds approximately $1,250 per year (IRS No. 1900). However, even if the income is less than approximately $1,250, a separate local tax return is required (the approximately $1,250 rule applies only to income tax). The criteria differ for full-time workers and self-employed individuals due to basic deductions and other factors
Why are there no zero-cut (no margin call) features in domestic FX trading?
This is due to the structure of the law. Article 39 of the Financial Instruments and Exchange Act prohibits compensation for customer losses, and Article 117 of the Cabinet Office Ordinance obligates brokers to require customers to deposit the amount of the margin deficit. In other words, domestic brokers do not have the option of exempting customers from margin calls. For more details, pleasearticle on no margin calls and zero cuts in overseas forex trading, whichexplains the relevant articles.
Summary | The essence of the difference is "whether it's inside or outside of Japanese regulations."
Key points of this article
- The fundamental difference between overseas and domestic forex trading boils down towhether it's "inside or outside the regulations of Japan's Financial Instruments and Exchange Act." Differences in leverage, zero-cut protection, trust protection, and taxes all stem from this.
- Domestic FX= 25x leverage, margin calls, mandatory trust protection, flat rate of 20.315% + 3-year loss carryforward.Overseas FX= high leverage, zero cut, protection depends on the broker, comprehensive taxation, no loss carryforward.
- The tax burdenreverses, with domestic FX trading becoming more advantageous at taxable income of approximately $20,625. Loss offsetting between overseas and domestic trades is not possible.
- The choice between the twofour questions: funding, leverage, taxes, and self-management. Using both in combination, dividing the roles between them, is also an option (however, profits and losses cannot be combined).
- In 2026, the revised Payment Services Act will bring changes to the deposit and withdrawal environment for overseas forex trading. If you're going to use overseas forex, carefully selecting a broker and securing deposit and withdrawal channels are essential
Overseas forex and domestic forex are not a matter of one being superior to the other; they are simply two options with different risk allocations. If you're going to try overseas forex, the golden rule is to "only trade with an amount you can afford to lose and with a trustworthy broker." When choosing a broker, please refer to overseas forex broker safety rankings, evaluation criteria , and rankings of recommended overseas forex brokers with good reputations
The main appeal of overseas forex trading lies in its leverage. While the maximum leverage in Japan is 25x, overseas forex brokers offer leverage of 500x to 5000x, depending on the broker, allowing for efficient capital growth.
Conversely, this also means that losses can be substantial if money management is not properly managed. Although there is a zero-cut function, be aware that losses can still escalate if the timing is wrong. For those who can manage their money effectively, overseas forex trading might be a better option.
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