Japan’s Stablecoin Issuers Could Fill Gap in Central Bank Bond Purchases

Japan’s Stablecoin Issuers Could Fill Gap in Central Bank Bond Purchases

Japan’s first yen-denominated stablecoin issuer, JPYC, said rising demand could make stablecoin reserves a new force in Japan’s bond market. Japan’s first domestic stablecoin issuer said digital asset companies could soon become major players in the country’s government bond market, potentially changing monetary policy.

JPYC, the Tokyo-based company behind Japan’s first yen-pegged stablecoin, said issuers could become major buyers of Japanese government bonds (JGBs) as their reserves grow.

In comments published by Reuters, JPYC founder and CEO Noritaka Okabe said stablecoin reserves could fill a gap left by the Bank of Japan’s (BOJ) slowing bond purchases.

The Tokyo-based startup began issuing its yen-backed token, also known as JPYC, on Oct. 27 under the revised Payment Services Act, the first legal framework for stablecoins. The company has issued about $930,000 worth of tokens so far and aims to reach a circulation of $66 billion over the next three years.

The token is backed by a combination of bank deposits and Japanese government bonds (JGBs) and is fully convertible into yen. It is also designed to move seamlessly along blockchain tracks.

Stablecoin issuers as new bond buyers

Okabe said JPYC plans to invest 80% of the proceeds from the issue in Japanese government bonds (JGBs) and keep the remaining 20% ​​in bank savings, initially focusing on short-term securities. He added that the company may consider longer-term JGBs in the future as demand grows and yields remain attractive.

This type of allocation could give stablecoin issuers a significant role in Japan’s bond market, where the BOJ still holds about half of the $7 trillion in the Japanese bond market. As the central bank slows down its bond purchases, new buyers have to absorb the issuance.

For this reason, Okabe raised the idea that stablecoin reserves could naturally fill some of the vacuum, linking blockchain adoption to fiscal financing.

“The volume of JGB stablecoin purchases will be influenced by the balance of supply and demand for stablecoins,” he said, noting that this trend “will happen all over the world” and that Japan will be no exception.

Stablecoin adoption in Japan

Okabe’s comments came as stablecoins continue to gain acceptance in Japan’s traditional financial sector.

On Friday, the Financial Services Agency (FSA), the country’s financial regulator, approved a yen-pegged stablecoin project led by Japan’s largest financial institutions.

The FSA announced the “Payment Innovation Project,” an initiative that includes Mizuho Bank, Mitsubishi UFJ Bank, Sumitomo Mitsui Banking Corporation, Mitsubishi Corporation and its financial arm, and Progmat, MUFG’s stablecoin issuance platform.

The regulator said the companies will begin issuing payment stablecoins this month.

*This is not an investment recommendation.

The Coingarage Team