Japan Stablecoin Issuers Could Reshape Sovereign Debt Market

Japan’s Stablecoin Issuers and the Sovereign Debt Market

Japan’s first domestic stablecoin issuer, JPYC, foresees digital asset companies becoming significant players in the country’s sovereign debt market, potentially reshaping monetary policy. JPYC, the Tokyo-based firm behind Japan’s inaugural yen-pegged stablecoin, believes issuers may evolve into major buyers of Japanese government bonds (JGBs) as their reserves expand.

According to Reuters, JPYC founder and CEO Noritaka Okabe stated that stablecoin reserves could fill the gap left by the Bank of Japan (BOJ) as it slows its bond purchases. The Tokyo-based startup launched its yen-backed token, also known as “JPYC,” on Oct. 27, under the country’s revised Payment Services Act – its first legal framework for stablecoins. The company has issued approximately $930,000 worth of tokens to date and aims to reach a circulation of $66 billion within the next three years. The tokens are backed by a combination of bank deposits and JGBs and are fully convertible to yen. They are also designed to move seamlessly across blockchain rails.

Stablecoin Issuers as New Bond Buyers

Okabe said JPYC plans to invest 80% of its issuance proceeds in JGBs and keep the remaining 20% in bank savings, initially focusing on short-term securities. However, he added that the firm could consider longer-term JGBs in the future as demand grows and yields remain attractive. This allocation could give stablecoin issuers a significant role in Japan’s debt market, where the BOJ still holds approximately half of the $7 trillion JGB market. As the central bank slows bond purchases, new buyers need to absorb the issuance.

Okabe suggested that stablecoin reserves could naturally fill part of the vacuum, linking blockchain adoption to fiscal financing. "The volumes of JGBs stablecoin issuers buy will be swayed by the balance of supply and demand for stablecoins," he said, noting that this trend "will happen around the world" and that Japan will not be an exception.

Stablecoin Adoption in Japan

Okabe’s remarks come as stablecoins continue to gain traction in Japan’s traditional finance sector. On Nov. 7, the Financial Services Agency (FSA), the country’s financial regulator, endorsed a yen-pegged stablecoin project led by Japan’s largest financial institutions. The FSA announced the “Payment Innovation Project,” an initiative involving Mizuho Bank, Mitsubishi UFJ Bank, Sumitomo Mitsui Banking Corporation, Mitsubishi Corporation and its financial arm, and Progmat, MUFG’s stablecoin issuance platform. The regulator stated that the companies will begin issuing payment stablecoins this month.