Japan's financial establishment is executing a coordinated three-front push to migrate core settlement infrastructure onto blockchain rails. On September 30, 2026, the Financial Services Agency convened the inaugural session of its "On-Chain Finance Forum for the AI Era," chaired by the Minister ...
"While this truly remains a 'vision' — one that we will now build piece by piece — I believe we have successfully succeeded in sketching out the 'big picture' as a first step." — Seiji Kihara, Chair, LDP Parliamentary League for Blockchain Promotion
Japan's financial establishment is executing a coordinated three-front push to migrate core settlement infrastructure onto blockchain rails. On September 30, 2026, the Financial Services Agency convened the inaugural session of its "On-Chain Finance Forum for the AI Era," chaired by the Minister of State for Financial Services and staffed with eight academic experts. Four days earlier, on September 15, the FSA had designated on-chain finance its top policy priority for the 2026 program year. On October 8, the Ministry of Finance will hold the first meeting of a separate study group examining blockchain-based settlement of Japanese Government Bonds — a market valued at 1,013.8 trillion yen ($7.3 trillion) as of March 2026.
These initiatives arrive atop a foundation built over three years: the 2023 Payment Services Act amendment that created the "electronic payment instruments" category; the June 2025 revision adding crypto intermediary licenses; Japan's July 2026 reclassification of crypto as financial products under the Financial Instruments and Exchange Act; and the FSA's August 2026 creation of a dedicated Cryptocurrency and Stablecoin Division. The combined effect is the most comprehensive state-led blockchain integration program among G7 economies, spanning sovereign debt, stablecoins, tokenized equities, and the $1.6 trillion repo market.
The On-Chain Finance Forum for the AI Era held its first session on September 30, 2026, following its formal establishment in summer 2026. The Forum reports to the Minister of State for Financial Services, who serves as chair. Participating agencies include the FSA, the Digital Agency, the Ministry of Finance, the Bank of Japan, and the Japanese Bankers Association.
Eight expert members were appointed: Masato Ui (Brunswick Group), Nana Otsuki (NUCB Business School), Yuri Okina (Japan Research Institute), Hideki Kanda (University of Tokyo, Emeritus), Chikako Suzuki (PwC Japan), Naoko Nemoto (Waseda University), Hironari Nozaki (Toyo University), and Tetsuo Morishita (Sophia University).
The Forum articulates three operational requirements for modernized settlement infrastructure:
The mandate is explicit: deliver an interim summary and a joint public-private roadmap by early 2027. Two working groups operate beneath the Forum — one on environmental development (legal and regulatory frameworks) and one on the governance of AI in financial systems.
The Forum's framing is notable for its premise. It defines the coming economic environment as one of "Agentic Commerce" — autonomous AI agents conducting cross-border transactions without manual human intervention, 24 hours a day, 365 days a year. The implication is that legacy settlement systems operating on T+1 or T+2 cycles cannot serve this architecture.
The Ministry of Finance announced on September 30 the formation of a "Study Group on On-Chain Settlement of Government Bonds." Its first meeting is scheduled for October 8. Members include researchers from the University of Tokyo and Waseda University and a private-sector strategist. The Bank of Japan and FSA will participate as observers.
The scope: compare the current next-business-day settlement convention for JGBs with a blockchain-based mechanism for simultaneous delivery-versus-payment. The study group targets a compilation of findings between December 2026 and January 2027.
The scale is significant. Outstanding JGBs totaled 1,013.8 trillion yen as of March 2026. Holdings break down as follows: Bank of Japan 485.4 trillion yen (47.9%), insurance companies 155.3 trillion yen (15.3%), banks 149.7 trillion yen (14.8%), and foreign investors 82.0 trillion yen (8.1%). Japan's repo market alone accounts for roughly $1.6 trillion, approximately 10% of the global $16 trillion repo market.
The ruling Liberal Democratic Party's Policy Research Council approved the "Next-generation AI & Onchain Finance Concept" in May 2026. The proposal was drafted by a project team chaired by Seiji Kihara, a former Ministry of Finance official and current chair of the LDP's Parliamentary League for Blockchain Promotion. Former Digital Minister Taira Masaaki, who has led the LDP's web3 policy agenda since 2023, founded the group.
The blueprint promotes three core elements:
The LDP council stated: "The expanded adoption of blockchain technology will play a crucial role in establishing the necessary infrastructure to ensure that the nation remains 'chosen by AI.'" It further noted that early leadership in secure on-chain payment infrastructure could deepen cooperation "particularly with Asian countries that share strong economic ties with Japan."
The proposal asks deposit-taking financial institutions to develop tokenized deposit products and reach a clear position on key implementation issues within the year.
MUFG, Sumitomo Mitsui Banking Corporation (SMBC), and Mizuho Bank — Japan's three megabanks — formed a council in June 2026 to jointly issue a stablecoin. Target: live commercial transactions within fiscal year 2026, ending March 2027.
Structure: The stablecoin will be issued under a trust agreement, with the three banks as joint settlors and a trust bank as trustee. The token will run on MUFG's Progmat platform, which supports issuance across Ethereum, Polygon, Avalanche, and Cosmos.
The initial product is a yen-pegged token for corporate and interbank settlement, with a dollar-denominated version planned for later in 2026. The three banks have been testing under an FSA-backed pilot.
In parallel, JPYC — issued by SBI Shinsei Trust Bank and distributed through SBI VC Trade — launched on June 24, 2026, as Japan's first licensed trust bank-backed yen stablecoin. It is classified as an electronic payment instrument under the Payment Services Act, backed by bank deposits and JGBs, and carries no transaction cap. As of June 2026, cumulative issuance had passed 3 billion yen (~$19 million), with 19,000 accounts opened on the JPYC EX platform. JPYC targets 10 trillion yen (~$65 billion) in circulation within three years.
On April 20, 2026, JSCC (Japan Securities Clearing Corporation), Mizuho, and Nomura launched a proof-of-concept to test JGB digital collateral on the Canton Network, with Digital Asset Holdings as the fourth participant. The objective: migrate the full repo transaction lifecycle to blockchain infrastructure with simultaneous delivery-versus-payment settlement.
In August 2026, four Mitsubishi UFJ Financial Group companies began testing JGB repos on Canton, examining 24-hour automated settlement.
The consortium includes BlackRock Japan, Daiwa Securities, SBI Securities, State Street Trust Bank, and Tokio Marine Holdings. A formal report covering legal, tax, and operational issues is due in October 2026, with the full initiative targeting a live launch before year-end.
A consortium led by SBI Holdings, comprising Japan's major securities firms and trust banks, is launching 24/7 tokenized stock trading in 2026. The system will allow retail and institutional investors to trade tokenized versions of public company shares with minimum purchase sizes as low as 1 yen.
Japan's public STO (security token offering) market recorded issuances totaling 46.4 billion yen (~$300 million) in fiscal year 2024, contributing to a cumulative total of 168.2 billion yen. SBI Global Asset Management and DigiFT launched a tokenized Japanese equity fund on Solana in July 2026.
The Japan Blockchain Market was valued at $1.58 billion in 2025, projected to reach $22.9 billion by 2030 — a 70.8% compound annual growth rate, according to MarketsandMarkets.
Japan's blockchain regulatory framework has been constructed in layers:
| Date | Action | |------|--------| | 2017 | Payment Services Act amended to cover crypto-asset exchange services | | June 2023 | PSA amended: "electronic payment instruments" category created for stablecoins | | August 2025 | JPYC authorized as first licensed stablecoin issuer | | June 2025 | PSA revision adding crypto intermediary licenses enacted | | June 2026 | Full implementation of 2025 PSA amendments | | July 2026 | Cryptocurrencies reclassified as financial products under FIEA | | August 2026 | FSA creates dedicated Cryptocurrency and Stablecoin Division | | September 15, 2026 | FSA designates on-chain finance as top 2026 priority | | September 30, 2026 | On-Chain Finance Forum inaugural session | | October 8, 2026 | MoF JGB settlement study group first meeting |
FSA Commissioner Yutaka Ito stated in his June 1, 2026 keynote at the International Monetary Conference that the FSA "will continue to develop regulatory frameworks in an agile and adaptive manner, while ensuring user protection, market integrity, and financial stability." He noted blockchain's key features include "tamper-resistant record-keeping, shared access among relevant parties, and seamless integration with automated processing through smart contracts."
The FSA's international strategy includes inter-authority dialogues with foreign regulators on stablecoin reserve assets, redemption mechanics, and yen-foreign currency interoperability. An Asia Public-Private Policy Dialogue Framework aims to enhance cross-border remittance efficiency and share legal and technical standards.
The LDP blueprint explicitly calls for an Asian policy framework aligning RWA audits, KYC rules, and cross-border on-chain finance standards. The FSA plans to host "Asia Day 2027" during Japan Fintech Week (February-March 2027) to advance these discussions.
This regional dimension carries weight. Japan's three megabanks operate extensive networks across Southeast Asia. If the yen stablecoin architecture succeeds domestically, the infrastructure could serve as a template — or a competitor — for similar efforts in Singapore, Hong Kong, and South Korea.
Three simultaneous institutional initiatives. The FSA Forum, MoF JGB study group, and LDP policy blueprint represent coordinated action across Japan's regulatory, legislative, and executive branches — an unusual degree of alignment.
$7.3 trillion in sovereign debt under review. The JGB settlement study group is examining blockchain migration for the world's second-largest government bond market.
Megabank stablecoin launch by March 2027. MUFG, SMBC, and Mizuho are targeting live commercial transactions with a jointly issued yen stablecoin on the Progmat platform.
Repo market proof-of-concept underway. JSCC and major banks are testing full lifecycle JGB repo settlement on the Canton Network, with a live launch targeted before end-2026.
"Agentic Commerce" as policy premise. The FSA's framework explicitly anticipates autonomous AI agents as primary users of settlement infrastructure — a framing that no other G7 regulator has adopted at the policy level.
Regulatory stack largely complete. Japan has spent three years building the legal foundation — stablecoin classification, crypto intermediary licensing, FIEA reclassification, and a dedicated FSA division. The current push is implementation, not legislation.
Japan's on-chain finance initiative is distinguishable from similar efforts elsewhere by two characteristics: its scope and its coordination. The U.S. has passed stablecoin legislation. The EU has implemented MiCA. Singapore and Hong Kong have issued crypto licenses. But no other jurisdiction has simultaneously moved to put its sovereign bond market, its banking settlement layer, its stablecoin architecture, and its equity trading infrastructure on blockchain rails — with backing from the central bank, the financial regulator, the finance ministry, and the ruling party.
The ambition carries risks. JPYC's $19 million in cumulative issuance against a $65 billion three-year target reflects the distance between policy aspiration and market adoption. The Canton Network proof-of-concept for JGB repos has yet to produce a live transaction. The megabank stablecoin has a March 2027 target but no confirmed launch date.
The timeline for measurable outcomes is December 2026 through March 2027, when the JGB study group, the FSA Forum roadmap, and the megabank stablecoin are each scheduled to deliver results. Whether the institutional coordination translates into infrastructure that market participants actually use remains an open question. The answer will determine whether Japan's on-chain finance push represents a viable model for sovereign financial modernization or an elaborate policy exercise.