Japan wants the yen to fight the dollar on stablecoin turf

Japan's ruling Liberal Democratic Party is pushing for yen-backed stablecoins to become the default settlement currency across Asia, in a direct challenge to the dollar's dominance in the global stablecoin market.

The LDP's panel on the promotion of blockchain technology submitted the proposal to Finance Minister Satsuki Katayama, who also oversees Japan's financial regulator, the Financial Services Agency (FSA). The panel called for Japan to promote the usage of yen-based stablecoins for settlement in Asia and to create a legal framework allowing the trading of crypto exchange-traded funds (ETFs).

Dollar-pegged coins like $USDT and $USDC account for most of the $315 billion stablecoin market, and policymakers outside the US worry these tokens could route payments around domestic banks, cutting commercial lenders out of cross-border flows. LDP lawmaker Junichi Kanda told reporters after the meeting that Japan plans to use upcoming multilateral events to advance its case. Japan is expected to showcase its blockchain and digital finance initiatives when it hosts the Asian Development Bank's annual meeting next year, potentially providing a platform to highlight the country's stablecoin ecosystem.

A Growing Domestic Ecosystem

The proposal lands at a moment when Japan's yen stablecoin industry is already taking shape. Japan's stablecoin journey began with JPYC Inc. (@jpyc_official), which issued the first regulated yen-pegged stablecoin in Japan in October 2025. The startup has issued over 1 billion yen (approximately $6.3 million) in coins since then.

Japan's three largest banks have also entered the race. Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group announced a joint stablecoin experiment, running a proof-of-concept in March 2026 that tested both yen-pegged and dollar-pegged coins on the Progmat infrastructure. The FSA granted the project "Payment Innovation Project" status. SBI Holdings and Startale Group have also moved forward with JPYSC, a trust bank-backed yen stablecoin managed by SBI Shinsei Trust Bank, targeting a Q2 2026 launch.

Crypto ETFs Also on the Table

Beyond stablecoins, the proposal also calls for building a legal framework that would allow crypto ETF trading in Japan. The panel argues that crypto ETFs would serve as a far more familiar investment vehicle for traditional investors. This would put Japan alongside the United States and Hong Kong, both of which already allow crypto ETFs as a way for investors to gain exposure to digital assets without holding the coins directly.

In April, Japan's cabinet approved a draft amendment to reclassify cryptocurrency as a financial product. Previously, Japanese law treated crypto only as a payment tool. That reclassification supports the ETF framework. Finance Minister Katayama has not yet publicly responded to the proposal.

Sources:
Reuters via Yahoo Finance: Japan must promote yen stablecoins in Asia, ruling party panel says
Cryptopolitan: Japan's ruling party pushes crypto ETFs and yen stablecoins
Japan Times: JPYC, world's first yen stablecoin, is issued