Japan plans blockchain system for near-instant stock and bond settlement

Japan is preparing to develop a nationwide blockchain-based settlement system for stocks and Japanese government bonds as regulators and financial institutions look to modernize the country’s capital markets. The Financial Services Agency, Ministry of Finance and Bank of Japan are expected to form a working group this summer, with development targeted to begin by early 2027. A formal launch could come in the early 2030s if the project receives approval and trials are successful, Nikkei reported.

At the center of the plan is the tokenization of bank reserves held at the BOJ. Banks would convert part of their existing reserve balances into digital tokens representing yen, creating a wholesale CBDC that could be used for settlement between financial institutions. The system would not be intended for consumers.

The proposed network could sharply accelerate Japan’s securities settlement cycle. Tokyo-listed stocks currently settle two business days after trades are executed, while JGB transactions settle one day later. Bringing settlement closer to real time would give investors access to proceeds almost immediately and potentially allow capital to be redeployed faster.

The push reflects growing competition among major financial centers to adopt tokenized assets and blockchain-based market infrastructure. A Nomura and Laser Digital survey published in April found that almost 80% of Japanese institutional investors expect to invest in crypto within three years. Nikkei said Japan risks losing some of that investor activity to jurisdictions such as the US and Europe, which are also pursuing tokenization.

The country’s financial institutions have already begun experimenting with the technology. MUFG is preparing a Canton Network proof of concept for real-time JGB settlement, while MUFG, SMBC and Mizuho are jointly testing tokenized stocks and government bonds. The BOJ expanded its blockchain settlement sandbox in March to examine CBDC and blockchain applications, including links with existing interbank and securities settlement systems.

The BOJ is also participating in Project Agorá, a BIS-led effort involving seven central banks and more than 40 financial institutions to develop tokenized cross-border payment infrastructure. The domestic Japanese system could eventually support or provide a foundation for that broader initiative.