A string of stablecoin projects has begun to shake up Japan’s digital money ecosystem. It quietly opened the door to yen-pegged stablecoins this month. But these won’t replace cash at the local supermarket. Instead, they are being built in the quieter corners of the finance world.
Japan’s payments market is flush with cashless options, which may limit the appeal of stablecoins in everyday transactions, according to Makoto Shibata, head of Finolab, a Tokyo-based fintech innovation hub.
Japan is historically cashless
According to Shibata, “If you go to places like convenience stores, you would see like 40 or 50 different types of payment options. I don’t think stablecoins would compete with that real world payments, but I think that there will be a new use cases for online purchases or making settlement online.”
Although the cashless payment ratio climbed to 43% in 2024 in the country, cash remains the preferred method of payment among small businesses and rural Japan. Shibata said the real potential for stablecoins lies in digital commerce and online settlements, rather than in day-to-day transactions.
“There’s a big appetite from private enterprises to make international transfers more efficient.”
Stablecoins for B2B settlement
Fintech start-up JPYC launched Japan’s first yen-based stablecoin on October 27. It was the first license issued under the newly amended Payment Services Act. JPYC, a non-bank entity founded in 2019, received approval to issue stablecoins on August 18, following an arduous multi-year licensing process.
Japan’s largest banks are also weighing stablecoins for B2B settlements to speed up corporate fund transfers. Traditional banks are under pressure to digitize payments or risk being left behind on the world stage. On October 17, three mega banks, MUFG, Sumitomo Mitsui and Mizuho, announced joint plans to issue a yen-pegged stablecoin.
The banks plan to build an infrastructure that allows their business clients to move funds between one another smoothly and under uniform standards. They will begin pilot tests of their stablecoin system within the hundreds of Mitsubishi subsidiaries using a system developed by Tokyo-based fintech start-up Progmat. The move, while modest in scope, signals a turning point.
“If banks are reluctant to introduce new ways of payment, they will lose business or their deposit base to other financial institutions. I think it’s very symbolic that three mega banks together are trying to support this move, not just one single bank.”
~ Makoto Shibata, head of Finolab.
Japan’s steady march towards tokenization
Shibata said there are signs that Japan’s market for secure tokens and digital assets tied to real-world assets is expanding. Behind the scenes, the banking sector is backing DeFi innovation.
The Progmat platform has attracted investment from major sponsors such as MUFG and Mizuho. Meanwhile, Nomura Holdings and Nomura Research Institute jointly launched a blockchain subsidiary called B.o.o.s.t.r.y to develop Japan’s security tokenization market. SBI Group is also a major sponsor of digital asset market Osaka Digital Exchange (ODX), which hopes to build a digital asset hub in the Osaka area.
The shifting interest in DeFi was on full display at this year’s Tokyo Web3 Expo, where the audience evolved from mainly crypto nerds to also executives in suits. Unlike in the U.S. or Europe, where fintech startups compete with financial institutions, web-native startups typically collaborate with banks.
Japan is home to some 400 fintech companies, of which 30 to 40% focus on payment and remittances services, according to KPMG. It’s a relatively low figure compared to 900 in Singapore and 1,100 in Hong Kong.
The 38th Global Financial Centres Index ranked Tokyo in 15th place in its overall financial market from 135 cities. But, in the field of Fintech, Tokyo lags behind Hong Kong, Singapore, Seoul, and Beijing in its ability to provide a competitive environment for FinTech providers.
Collaboration over disruption
Bitcoin emerged as an antithesis to traditional finance and has flourished in deregulated markets like the U.S. But Japan’s business culture favors carefully designed groundwork and strong foundations before innovation, explains Soichiro Tokuriki, CEO of Next Finance Tech, a Japan-based blockchain infrastructure company founded in 2021.
Tokuriki said Japan prefers to “construct a reinforced concrete bridge with trustworthy institutions before crossing it.” That caution, he said, explains why few domestic crypto tokens exist and why most Web3 infrastructure used by Japanese exchanges still comes from abroad.
Japan’s tech landscape often mirrors its cautious approach to innovation. Tokuriki highlights a pattern in which Japanese society tends to adopt foreign technology, such as iPhones and Microsoft software, once it has matured abroad.
Currently, the Banking Act prohibits banks and bank subsidiaries from offering crypto trading services. This month, the Financial Services Agency (FSA) began reviewing the restriction.
Tokuriki said Japan’s biggest opportunity lies in allowing investors to gain exposure to crypto assets through exchange-traded funds or investment trusts. He points out how BlackRock, the world’s largest asset manager, has already begun including Bitcoin in some of its model portfolios.
Tokuriki, a former Goldman Sachs asset manager, said there is strong demand for alternative assets in Japan. He said retail and institutional investors are looking for new forms of diversification within existing financial rules.
Consensus-building is a major consideration in Japan’s business world. Since Japan’s financial market is one of the world’s biggest, Tokuriki argues for the importance of a “collaborative mindset” in order to grow and innovate within the ecosystem.
“Japan’s risk-averse culture may not suit ‘staunch’ entrepreneurs. But rather than seeking outright disruption, I believe the key lies in collaboration and figuring out how to help traditional finance players build businesses using new technologies.”
Makoto Shibata of Finolab stresses that Japan’s progress in digital assets will be evolutionary rather than explosive. He said stablecoin adoption isn’t a race. Each step in Japan’s slow-and-steady model is about showing how technology can improve finance and efficiency, even if it’s a few new use cases at a time.
