Japan’s growing stablecoin industry may soon play a major role in the country’s massive $9 trillion government bond market as the Bank of Japan (BOJ) slows its bond purchases.
The shift comes as JPYC, a Tokyo-based startup and issuer of Japan’s first yen-backed stablecoin, expands operations under the nation’s new Payment Services Act, which legally recognizes stablecoins.
JPYC has issued about $930,000 worth of tokens so far, backed fully by bank deposits and Japanese government bonds (JGBs). The company aims to reach a 10 trillion yen ($66 billion) circulation within three years.
Founder and CEO Noritaka Okabe said stablecoin issuers could soon take over the BOJ’s role as one of the largest buyers of JGBs. “With the BOJ tapering bond buying, stablecoin issuers could emerge as the biggest holders of JGBs in the next few years,” Okabe told Reuters.
The BOJ currently holds about 50% of Japan’s 1,055-trillion-yen bond market, but its reduced purchases have raised questions about who will absorb new government debt. JPYC plans to invest 80% of its stablecoin reserves in JGBs and 20% in bank deposits, potentially filling that gap.
Japan’s Financial Services Agency (FSA) has backed initiatives to integrate stablecoins into the financial system. On November 7, the FSA launched a pilot under its Payment Innovation Project with Japan’s three largest banks — Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho — to develop a shared framework for issuing yen-pegged stablecoins.
JPYC’s approach also aims to strengthen the yen’s position in global digital finance. Currently, over 99% of stablecoins worldwide are pegged to the U.S. dollar, leading to higher transaction and hedging costs for Japanese companies.
By offering fee-free transactions and earning from interest on JGB holdings, JPYC hopes to promote wider use of yen-backed digital assets.
While Japan’s regulators remain cautious about financial stability, they see potential in stablecoins to modernize payments and strengthen the domestic currency’s digital presence. Any expansion of issuance will be closely monitored to ensure proper asset backing and redemption rights.
