based on materials from the website - By FinanceFeeds

Japan's main financial regulator is preparing to approve the issuance of yen-denominated stablecoins this fall, paving the way for the country's first national digital currency pegged to fiat, reports Nikkei.

Tokyo-based fintech company JPYC is expected to lead the implementation process, with its registration as a money transfer service set to be completed this month. JPYC tokens will have a fixed exchange rate of 1 yen = 1 yen, backed by liquid assets such as bank deposits and Japanese government bonds. After acquisition by individuals or corporations, tokens will be issued through bank transfers to users' digital wallets.

This event followed the revision of the Payment Services Act in Japan in 2023, which officially legalized stablecoins under strict conditions. Unlike many jurisdictions where stablecoin issuers operate in 'grey' legal zones, Japan has established one of the clearest regulatory frameworks for fiat-backed tokens. The law requires issuers to have a banking license, money transfer service license, or trust company license, ensuring transparent management of reserves and their constant redemption capability.

The approval comes amid a rise in the global stablecoin market to over $286 billion, dominated by dollar-pegged tokens such as USDT Tether and USDC Circle. While these American stablecoins are already trading in Japan, JPYC will be the first option developed based on the yen.
Analysts believe this move could strengthen Japan's financial sovereignty by reducing dependence on dollar-denominated digital assets. The widespread adoption of a yen-denominated stablecoin could also encourage Japanese corporations and fintech companies to experiment with blockchain-based settlement systems, cross-border trade, and decentralized finance (DeFi) applications denominated in yen. Potential growth in the Japanese bond market.
Okabe, a representative of the issuing company, stated in a recent post on X that yen-denominated stablecoins could change Japan's bond market. He noted that in the US, stablecoin issuers have become major buyers of treasury bonds, and a similar trend could increase demand for Japanese government bonds (JGB).

"JPYC is likely to start actively buying Japanese government bonds in the future," he wrote, adding that countries that slowly adopt stablecoins risk higher bond yields as they miss out on new institutional demand.

In the US, Tether is currently one of the largest holders of short-term treasury bills, effectively creating a new class of non-bank institutional investors. If yen-denominated stablecoins follow this trend, Japan could find an additional, tech-oriented buyer base for its vast government bond market — which is crucial given that the country's public debt is the highest among developed economies at over 250% of GDP. This move also follows the entry of foreign players into the market. Circle launched USDC in Japan in March, receiving regulatory approval for listing on SBI VC Trade, a joint venture with SBI Holdings. Circle plans to expand its listing to Binance Japan, Bitbank, and BitFlyer, two of which are among the leading exchanges in the country.


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