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Japan is moving to build blockchain-based settlement infrastructure to enable 24-hour instant settlement for stocks and Japanese government bonds. The Financial Services Agency, Ministry of Finance, Bank of Japan, and major financial institutions plan to launch a study group this summer and draft a development roadmap as early as early 2027. The core concept involves converting a portion of banks’ current account deposits at the Bank of Japan into digital tokens that can circulate on a blockchain, effectively shortening settlement cycles from the current T+2 for equities and T+1 for JGBs to near-instantaneous. Japan’s three megabanks and major securities firms are already running tokenized securities pilot programs, and if the plan is finalized, the system could go live as early as the early 2030s. The initiative positions Japan to compete with securities tokenization efforts in the US and Europe while laying groundwork for potential expansion into cross-border payments.
Key Elements
Japan is pursuing a plan to introduce blockchain technology into its securities settlement infrastructure—including its $7 trillion bond market—to enable 24-hour instant settlement for stocks and Japanese government bonds (JGBs). The initiative is a joint public-private project involving Japan’s Financial Services Agency (FSA), the Ministry of Finance, the Bank of Japan (BOJ), and major financial institutions, with a concrete development roadmap expected as early as early 2027.
According to a Nikkei report on the 26th, the relevant institutions will launch a study group this summer to examine blockchain design, division of responsibilities among institutions, and future development timelines. Once the plan is finalized, operational preparations could begin within a few years, with potential live deployment as early as the early 2030s.
The core concept is to convert a portion of the current account deposits that banks hold at the Bank of Japan into digital tokens that can circulate on a blockchain. This is closer in nature to a central bank digital currency (CBDC) used for interbank settlement rather than electronic money for retail use. The goal is to eliminate the time gap that currently exists between trade execution and settlement.
Currently, stock trades on the Tokyo Stock <a href="https://xpertsstudio.com/how-a-crypto-exchange-leaked-data-to-russian-intelligence-agencies/” title=”How a Crypto Exchange Leaked Data to Russian Intelligence Agencies”>Exchange settle two business days after execution (T+2), while JGBs settle the following day (T+1). With a real-time settlement system in place, sellers could receive proceeds immediately upon selling securities and reinvest them in other assets right away—effectively converting idle funds into working capital.
Japan’s three megabanks and major securities firms are already participating in the project. These institutions are conducting pilot programs to manage and circulate tokenized stocks and government bonds on blockchain platforms, and the system being developed by the government and the BOJ will serve as the settlement infrastructure that processes transaction payments for these tokenized securities in real time.
In April of this year, Japan’s four major banks conducted blockchain-based collateral trials using JGBs. SBI and the Solana Foundation are also pursuing on-chain financial applications built on yen-denominated stablecoins. Additionally, major Japanese corporations are testing tokenized JGB collateral transfers using the Canton Network, with a goal of achieving 24-hour bond trading by 2026.
Significant challenges remain. The blockchain system must achieve scalability, cybersecurity, and interoperability with existing financial infrastructure, and clear regulations regarding the legal status of digital assets are also needed. The study group plans to take a phased approach, jointly examining technical, legal, and operational hurdles.
Japan’s move aligns with broader trends in global financial markets. The United States shortened its equity settlement cycle from T+2 to T+1 in 2024, and Europe is also running blockchain-based settlement and clearing pilot programs. The Bank for International Settlements (BIS) has been operating a blockchain-based cross-border settlement pilot since 2024 involving central banks from Japan, Europe, and other regions.
Japan is also eyeing the potential application of this technology to international remittances. With the US and Europe leading securities tokenization technology and China also working to build a next-generation international payment network, Japan appears to be accelerating its own system development to avoid falling behind in the financial market infrastructure race.
Real-time settlement is expected to reduce systemic risk, lower costs, and enhance market liquidity. It could also pave the way for new financial products and services such as real-time securities lending and collateral management. Japan has shown a relatively proactive stance toward blockchain and digital asset innovation, having operated a licensing regime for cryptocurrency exchanges, and has continued its research into central bank digital currencies.
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Source: finance.biggo.com