Japan's ruling party just made on-chain finance national policy

Japan's Liberal Democratic Party has taken a significant step in reshaping the country's financial infrastructure. On May 19, the party's Policy Research Council formally approved the "Next-generation AI and On-Chain Finance Concept," a detailed blueprint built around blockchain settlement, yen-denominated stablecoins, and tokenized bank deposits.

Built for the Age of AI Agents

The proposal frames the shift as a necessity driven by AI. The LDP argues that autonomous AI agents cannot hold traditional bank accounts and require programmable, always-on financial rails to operate. Blockchain stablecoins and tokenized deposits are positioned as the infrastructure for 24/7 machine-driven commerce.

The document identifies tokenized deposits and stablecoins as its two core pillars. It calls for key questions around the tokenization of Bank of Japan current account deposits, including a wholesale central bank digital currency, to be resolved by the end of this year. On stablecoins, it asks ministries to work together to clarify their legal status for uses including salary payments and tax payments.

Japan's three major banks, MUFG, SMBC, and Mizuho, are already studying a joint stablecoin issuance, with the LDP targeting practical operations by March 2027.

Protecting Yen Sovereignty Against Dollar Dominance

The proposal carries an explicit warning: without action, Japan risks deepening its dependence on overseas payment systems and dollar-denominated stablecoins such as USDT and USDC. Stablecoin issuance in Japan has already grown to around 45 trillion yen, currently led by dollar-based instruments.

To counter this, the LDP has proposed a Global Stablecoin Corridor Initiative to expand cross-border payments using yen-based stablecoins, and an "AI and On-Chain Finance Asia Policy Dialogue Framework" to align regional standards covering KYC, AML, real-world asset audits, and cross-border rules. The proposal notes that between 40% and 50% of Japan's trade settlements with Asian countries are already yen-denominated, providing a foundation for broader regional cooperation.

The proposal also asks the Financial Services Agency to draw up a five-year roadmap and designates finance as one of Japan's key growth investment fields. The Cabinet may incorporate the plan into June's broader economic policy package.

Industry observers have noted that the LDP approval represents political momentum rather than a finalized regulatory regime. The sequence to watch is party approval, followed by the FSA roadmap, then concrete pilot rules or legislative proposals.

Sources:
Decrypt: Japan's Ruling Party Pushes On-Chain Finance Plan to Protect Yen
Crypto.news: Japan AI-Blockchain Finance Plan Backs Yen Stablecoins
Bloomingbit: Japan's LDP Unveils AI-Blockchain Finance Plan to Promote Stablecoins, Tokenized Deposits