Japan’s regulator, the Financial Services Agency (FSA), has announced its support for a collaboration among the country’s three largest banking groups — Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Financial Group (SMFG), and Mizuho Financial Group — to issue stablecoins, according to Finance Minister Satsuki Katayama, who also oversees the FSA. The announcement followed a cabinet meeting on Friday.
The banks plan to issue digital tokens jointly pegged to the Japanese yen and test them for use in cross-border payments. The FSA’s role will be to “assess whether the service can be carried out legally and appropriately.” The move comes as Japan seeks to modernise payment flows in a market still dominated by cash and credit-card usage.
Governmental and expert commentary
Industry experts have weighed in on the significance and challenges of this step. For example, in the launch of the first yen-pegged stablecoin by startup JPYC, CEO Noritaka Okabe said, “We hope to spur innovation by giving startups access to low transaction and settlement fees.”
At the same time, some caution prevails. Former Bank of Japan executive and academic Tomoyuki Shimoda noted, “There’s a lot of uncertainty on whether yen stablecoins will become widespread in Japan. If megabanks join the market, the pace could accelerate. But it could still take at least two to three years.”
Why the move matters
The government-backed project signals a significant shift: banks moving from exploratory blockchain/crypto experiments into regulated stablecoin issuance. It could enable more efficient domestic and international payments, reduce remittance costs, and help Japan maintain relevance in the digital-asset era. It also leverages Japan’s regulatory clarity — earlier this year, the FSA published analytical notes on stablecoins.
Still, several obstacles remain. Ensuring full reserve backing, regulatory compliance, and trust in the tokens is crucial. Critics warn of potential risks: tokens bypassing regulated banking channels or failing to gain traction among businesses and consumers. As Shimoda warned, even with strong institutional support, it could be several years before adoption becomes meaningful.
What next?
As the FSA assesses the legal framework and the megabanks refine their issuance plans, watchers will be looking for pilot results, timeline announcements, and development of standards for token transfer among institutions. If the pilot succeeds, Japan could become a model for bank-issued stablecoins in Asia and beyond.
