My understanding is you need to have a buy and a sell in order to trigger a taxable event.
Just holding foreign currency won’t trigger it.
So say you bought USD and sold JPY. Then later you sold USD back into JPY.
The taxable profit would be calculated using the USD/JPY rate that applied to your two transactions. This is the straight forward case.
It is more complicated if you have say USD and then buy say EUR, and then later sell those EUR for some other currency. In this case you need to calculate (as you mentioned a notional amount in JPY)
1) how much JPY those initial USD were worth when you bought the USD, and then
2) how much JPY your EUR were worth when you sold the EUR.
(You could conceivably sell those EUR back for USD, and think you made a taxable profit just looking at your extra USD, but if the yen miraculously increased enough in value, the JPY equivalent when you sold the EUR back for USD could be less than the first JPY notional amount, thus meaning no tax were due - that’s my understanding of the rules, as strange as it seems to me)
This page seems decent:
https://www.ht-tax.or.jp/topics/gaikayokin-shinkoku/
Also, if you earned income in a foreign currency, just converting it to yen would not incur any tax for the forex conversion, because it would be just one way. Just spending your foreign currency to buy something other than currency would also not incur such tax.
In general, calculating this forex tax is a pain, and the tax rate applied is your top tax rate. Therefore, I try to keep my forex conversions to forex brokers, which do annual trading report calculations that makes it all simpler and also the tax rate is a flat 20.315%, as they fall under futures trading in the tax rules.
If any profit you made was less than 200,000 yen then you are not obliged to file a tax return to report it though.