Japan is positioning its financial system for a tokenized future, as regulators, banks and major financial groups push to bring the yen economy onto blockchains. The yen is already a globally important currency — the IMF reports it accounted for 5.82% of foreign exchange reserves — but that central role has not been fully reflected in crypto-native markets. Tokyo wants to change that by building reliable, trust-backed yen stablecoins and the infrastructure to support them.
Why the yen matters onchain
A big reason the yen matters is the carry trade. For years, investors have borrowed yen at very low interest rates, converted it into other currencies and invested the proceeds in higher-yielding assets, making the yen a preferred global funding currency. If a liquid, low-cost yen stablecoin existed, it could extend those funding dynamics into crypto markets. Traders could borrow yen-denominated stablecoins at cheap rates, use them as collateral to access dollar stablecoins, and deploy funds into DeFi lending, liquidity provision and other yield strategies — with liquidity moved instantly around the clock instead of across business-day boundaries.
Political momentum and industry backing
Japan’s ruling Liberal Democratic Party has publicly aimed to make the country a Web3 hub. In April 2024 it published a Web3 white paper listing priorities that include stablecoins, security tokens and income tax reforms for individuals. Global policy shifts after the January 2025 change in the U.S. administration also spurred renewed debate and urgency around crypto policy.
Sanae Takaichi, who became prime minister in October 2025 and was recently reelected, is broadly viewed as supportive of pro-crypto policies, a stance welcomed by local industry participants.
Large financial firms are aligning with that policy direction. SBI Group has prioritized blockchain infrastructure and co-developed the Strium layer-1 blockchain with Startale Group to serve as settlement infrastructure for tokenized equities and real-world assets. Startale’s CEO Sota Watanabe frames the next onchain evolution as securities and stocks — but stresses that onchain dividends and voting require a dependable onchain yen representation. Without a credible yen stablecoin, some core use cases for tokenized securities are impractical.
Practical examples and projects
Startale has unveiled JPYSC, a yen-backed stablecoin aimed at enabling an onchain carry trade, with a planned second-quarter launch. The idea is that trust bank-backed stablecoins would let institutional players execute intraday swaps and carry strategies onchain. Startale says it is in talks with major U.S. institutions and DeFi firms, signaling cross-border interest, though counterparts have not been publicly named.
Barriers to scale: liquidity, regulation and tax
Scale is the clearest practical obstacle. Existing yen stablecoins in Japan, such as JPYC, have relatively small market capitalizations (JPYC was about $20 million at the time of reporting), leaving liquidity insufficient for large institutional carry trades or high-volume settlement needs.
Regulatory clarity is another major constraint. The treatment of stablecoins on bank balance sheets, accounting rules and capital requirements is still unsettled in many jurisdictions. U.S. regulators continue to wrestle with capital and accounting frameworks for institutions holding or issuing stablecoins, and similar uncertainties affect how banks and trust companies would underwrite or custody large stablecoin issuances. That ambiguity complicates planning for bank-backed yen stablecoins.
Japan’s three largest banks — Mitsubishi UFJ, Sumitomo Mitsui Banking Corporation and Mizuho — have reportedly discussed a joint yen-pegged stablecoin, indicating incumbent banks see commercial opportunity. Any large-scale bank-backed rollout, however, will require clear domestic guardrails.
Tax policy also dampens retail activity. Japan has taxed crypto gains at rates up to about 55%, a structure that has suppressed retail participation. The government is considering reclassifying crypto from a payment instrument to a financial product, which would reduce the effective tax rate to around 20% and enable crypto-based ETFs. That tax reform is currently scheduled to phase in starting in 2028; industry voices, including Sota Watanabe, argue for accelerating changes to 2027 to avoid falling behind international developments.
The broader opportunity and what it depends on
Bringing the yen onchain via liquid, trust-backed stablecoins could unlock a range of institutional uses: onchain dividends and voting for tokenized equities, faster securities settlement, institutional carry trades translated to crypto rails, and deeper integration of yen funding into DeFi and tokenized markets. But achieving that outcome depends on several conditions:
– Large, credible issuers or consortiums to provide liquidity and trust. Bank or trust-backed coins would likely command the most confidence from institutions.
– Deep market liquidity to support substantial borrowing and swapping without disruptive slippage.
– Clear regulatory and accounting frameworks that define how banks treat stablecoins, what capital is required, and how issuances will be supervised.
– Tax reforms that promote broader retail and institutional participation.
If Japanese authorities, major banks and financial groups can close the regulatory and market-structure gaps, a liquid yen stablecoin could reintegrate Japan’s funding currency into the onchain global financial system. That would make the yen an active pillar of tokenized capital markets, rather than a largely absent funding source in crypto finance.