Japan To Put Its $1.6t Repo Market On The Blockchain

A Consortium of Japan's Biggest Banks Moves to Tokenize Government Bonds

A consortium of Japan's largest financial institutions is planning to bring the country's government bond repo market onto the blockchain, targeting 24/7 trading with same-day settlement by end of 2026, according to a Nikkei report. The initiative marks one of the most significant steps yet by a major economy to tokenize sovereign debt at institutional scale.

According to FinanceFeeds, Progmat's Digital Asset Co-Creation Consortium has launched a joint study focused on tokenizing Japanese government bonds (JGBs) and enabling on-chain repo transactions settled through stablecoins. The working group includes Japan's three megabanks, Mitsubishi UFJ Financial Group (MUFG), Mizuho Financial Group, and Sumitomo Mitsui Financial Group, alongside BlackRock Japan, Daiwa Securities Group, SBI Securities, and State Street Trust and Banking.

Under the proposed system, bonds would be issued as blockchain-based security tokens and settled using stablecoins, compressing the settlement cycle from T+1 to T+0, meaning same-day finality. The consortium said it aims to establish infrastructure capable of supporting continuous settlement and plans to release formal recommendations on outstanding legal, tax, and regulatory questions later this year.

Why the Repo Market, and Why Now

The initial focus is Japan's repo market, which represents roughly 10% of a global repo market valued at around $16 trillion. Blockchain-based settlement could materially improve capital efficiency by enabling continuous collateral transfers and reducing operational friction, participants said. Analysts have also noted that tokenized sovereign bonds may allow institutions to reuse collateral more efficiently across markets.

The project is anchored by MUFG's Progmat platform. CoinDesk reported that MUFG founded Progmat in 2023 as a blockchain infrastructure and tokenization platform, backed by a wide consortium of Japanese institutions. Progmat has since been enhanced to support stablecoin issuance features that align with Japan's regulatory standards, with MUFG's trust banking unit acting as custodian for yen-backed tokens on a 1:1 basis.

The move builds on broader momentum inside Japan. Separately, Japan Securities Clearing Corporation, Nomura Holdings, and Mizuho recently launched proof-of-concept trials using the Canton Network to test blockchain-based collateral management and on-chain transfers of JGBs. The Bank of Japan has also said it would begin testing blockchain-based settlement systems for reserves held at commercial banks as part of a wider financial infrastructure modernization drive.

Significant questions remain. Analysts have cautioned that legal, tax, and operational hurdles must still be resolved before tokenized government bonds can operate at full institutional scale. The consortium expects to address those issues through formal recommendations in the coming months.

Sources:
FinanceFeeds: Japan Moves to Tokenize Government Bonds on Blockchain With Goal of 24/7 Settlement
CoinDesk: Japan's Top Banks Plan Joint Stablecoin Launch, Nikkei Reports
The Crypto Times: Japan Banks Bet on Blockchain to Modernize Bond Markets