Japan is preparing its financial system for a world of stablecoins and tokenized assets, and banks, regulators and financial conglomerates are working to keep the yen economy on the chain.
The country is the world’s fourth largest economy, and its yen is one of the most important currencies in global finance. According to the International Monetary Fund, the yen made up 5.82% of the world’s foreign exchange reserves, ranking third in the world.
The main reason for the systemic importance of the yen is the carry trade. Due to low interest rates, investors borrow cheap yen, convert it into other currencies, and invest in high-yielding assets, making the yen one of the most reliable funding currencies for global markets.
However, Japan’s central role in global finance is not represented in the blockchain economy. That changed after US President Donald Trump took office in January last year, accelerating the crypto policy debate around the world.
Like the US, Japan’s ruling party aims to become a global Web3 hub. Achieving this goal may depend on stablecoins that can lead to an on-chain yen. However, retail crypto activity in Japan remains relatively sluggish, even though the local industry is supported by some of the largest financial conglomerates and banks.
Japan’s crypto industry has the blessings of the government and conglomerates
Sanae Takaichi became the first female Prime Minister of Japan in October 2025. Within months of his presidency, he dissolved the lower house for snap elections. His Liberal Democratic Party (LDP) won a two-thirds majority on February 8, and lawmakers voted to re-elect Takaichi to a second term 10 days later.
Startale Group CEO Sota Watanabe told Cointelegraph that he is broadly aligned as the Trump administration politically and strategically accelerates local crypto adoption.
In April 2024, Takaichi’s LDP released a Web3 white paper to declare its goal of “making Japan a Web3 hub.” The document outlined 11 crypto issues for “immediate” resolution, including personal income tax reform, stablecoins and security tokens.
These priorities are also set in the blockchain strategy of SBI Group, one of Japan’s largest financial conglomerates, led by Yoshitaka Kitao.
“Kitao-san is the best person to lead the crypto revolution in Japan because he created SBI under the evolution of the Internet,” said Watanabe, who developed the Startale blockchain group of Strium SBI. Layer 1 aims to become a settlement infrastructure for institutional trading of tokenized shares and real assets (RWAs).
Kitao previously held executive positions at Nomura, Japan’s largest stockbroker, and later at SoftBank, alongside Masayoshi Son, who is second on the Forbes list of Japan’s richest people. Kitao later founded SBI for SoftBank.
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Watanabe claimed that SBI sees the next evolution of on-chain crypto as securities and stocks, although this would require a green light from the government.
“Currently, it is easy to build a derivative onchain, but to implement real dividends onchain, real voting rights of shares, it needs to be regulated,” said Watanabe, who added that he is in talks with the Japanese government.
Also, dividends for onchain assets cannot be paid offchain, so a stablecoin with yen is necessary.
Why is the yen stablecoin important?
Japanese interest rates and yen trading are the main forces that can move the markets. The Bank of Japan raised interest rates from -0.1% to 0.1% in March 2024, the first increase in 17 years. The following July, the central bank announced a more aggressive hike to 0.25%, which rattled global markets and Bitcoin (BTC).
A yen-backed stablecoin could expand carry trades to blockchain markets by bringing Japan’s low-cost debt onchain.
For example, an investor can borrow a stablecoin with yen at low interest rates. These funds can then be used as collateral to borrow USD stablecoins that can be used for decentralized finance (DeFi) lending, liquidity provision, or other income generation strategies.
On Friday, Startale backed its yen-backed stablecoin, JPYSC, which is targeting the start of the second quarter. According to Watanabe, the stablecoin was specifically designed to transfer the yen.
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“Once we implement the stability of a bank-backed stablecoin, it will become possible for global investors and institutions to trade yen on-chain,” he said.
Shipping business usually takes time. It may take a day or two to complete this process as Japan and US business hours do not match.
“But if we can do it there, we can do it 24/7 and instantly,” Watanabe said.
In theory, this could bring institutional yen lending to DeFi. But Justine d’Anetan, head of research at Arctic Digital, told Cointelegraph that an on-chain shipping business won’t have an impact if it doesn’t have massive backers and a large market capitalization.
Watanabe told Cointelegraph that he has held talks with the largest US financial institutions interested in trading and swaps overnight, though he declined to be named. He said he was also in touch with the “top players” in DeFi.
The process still needs approval from Japanese authorities, while the regulatory relationship of stablecoins on bank balance sheets remains unresolved. Authorities such as the US Securities and Exchange Commission are still working to clarify capital and accounting requirements.
Japan’s crypto scene is gaining momentum, but retail is lagging behind
A yen-backed stablecoin already exists in Japan in the form of JPYC, but it is primarily intended for payments. At the time of writing, its relatively small market capitalization of around $20 million makes it unsuitable for shipping businesses that require deep liquidity and high borrowing capacity.
SBI is not the only financial institution exploring stablecoins in Japan. According to reports, the country’s three largest banks – Mitsubishi UFJ, Sumitomo Mitsui Banking Corporation and Mizuho – are reportedly looking to jointly launch a yen-linked stablecoin.
Despite the interest of the traditional giants of local finance and the government, the activity of the retail industry is muted.
Slow retail adoption is often blamed for up to 55% tax on crypto investors. This too may change. Japan is studying the classification of crypto from a payment instrument to a financial product, which will reduce the tax on crypto to 20% and allow crypto-based exchange funds.
It is expected that the tax reform will begin in 2028. According to Watanabe, this is not good enough.
“The Japanese government is very slow,” he said. “Given that the U.S. is accelerating onchain financing, a 2027 tax cut is needed to reach it.”
For decades, the yen has served as a global funding currency through carry trades, but it is largely absent from the crypto industry. Retail participation remains limited by strict tax regulations, but governments and institutions are already deploying the yen to operate in blockchain-based capital markets.
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