Stablecoin issuers could become major buyers of Japanese government bonds (JGBs) in the coming years and affect the Bank of Japan’s control over monetary policy, according to Noritaka Okabe, chief executive of JPYC, the country’s first domestic yen-pegged stablecoin issuer.
“With the BOJ tapering bond buying, stablecoin issuers could emerge as the biggest holders of JGBs in the next few years,” Okabe told Reuters in an interview on Tuesday. “While authorities could try to control the duration of bonds stablecoin issuers buy, it would be hard for them to control the volume they hold. This will happen around the world. Japan is no exception.”
JPYC began issuing its yen-backed stablecoin on Oct. 27, marking a rare move in a market where cash and credit cards still dominate consumer payments. The company has issued around 143 million yen ($933,000) so far and has 4,707 account holders as of Nov. 12. It aims to expand issuance to 10 trillion yen ($66 billion) over three years.
Investor Takeaway
Yen-backed stablecoins could shift Japan’s bond market if issuance scales, giving private issuers new influence in a space long dominated by the central bank.
Yen’s Digital Presence
Okabe said the rise of dollar-backed stablecoins — which account for 99% of global circulation — puts Japanese firms at a disadvantage. “Various assets are now traded on blockchains real time across the world. But the stablecoin market is dominated by the dollar, which is a disadvantage to Japanese firms that need to pay extra hedging and transaction costs,” he said. “Japan must ensure the yen has a presence in the global stablecoin market.”
JPYC’s token is fully convertible to yen and backed by domestic savings and government bonds. The company invests 80% of its proceeds in JGBs and the remaining 20% in bank deposits. Okabe said the structure would support the local bond market while helping digitalize yen transactions. “JPYC will help the yen hold a presence in a rapidly growing digital market,” he said, adding that while the current issuance is small, yen-backed tokens could evolve into a liquid settlement asset for Japanese institutions as stablecoin infrastructure matures.
BOJ’s Shrinking Role
The Bank of Japan still holds roughly 50% of the 1,055-trillion-yen JGB market but began slowing purchases last year as it moved to phase out a decade of massive monetary stimulus. Policymakers are now watching whether domestic financial institutions — which trimmed their JGB holdings during years of ultra-low yields — will replace the BOJ as key buyers. A new government is also expected to increase bond issuance to fund spending plans.
Okabe said the involvement of stablecoin issuers could offset the BOJ’s reduced buying but may also limit its policy flexibility. “The volumes of JGBs they buy are swayed by the balance of supply and demand for stablecoins,” he said.
JPYC currently buys short-term securities but has been approached by lawmakers about purchasing longer-dated bonds. “It’s something we could look into in the future,” Okabe said.
Investor Takeaway
Stablecoin issuers could become a new source of demand for JGBs, complicating the BOJ’s ability to steer yields as traditional buyers retreat.
Broader Policy Landscape
The yen stablecoin launch coincides with growing global debate on how digital tokens interact with monetary policy. Stablecoins backed by U.S. dollars have surged with strong political backing from Washington. Japan’s three largest banks — Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho — have announced a joint stablecoin experiment with support from Japan’s Financial Services Agency.
While regulators have encouraged controlled innovation, policymakers also warn that stablecoins can move funds outside the banking system and weaken the role of commercial lenders in payments. Okabe said Japan’s approach — tying stablecoins to domestic reserves and sovereign debt — ensures transparency and regulatory oversight.
That said, JPYC remains a small player in a $290 billion global stablecoin market. But if its growth target is met, yen-backed stablecoins could emerge as a meaningful force in Japan’s financial system, linking blockchain payments directly to the government bond market.