Why Yen Stablecoins Are Vital to Japan's Crypto Goals

Yen stablecoins are rapidly emerging as the cornerstone of Japan's ambitions to become a global Web3 hub, with the country's largest financial conglomerates and regulatory bodies working in tandem to tokenize one of the world's most important funding currencies. Despite the yen accounting for 5.82% of global foreign exchange reserves and ranking third worldwide according to the International Monetary Fund, the currency has remained largely absent from decentralized finance. That dynamic is now shifting as institutions race to bridge traditional yen markets and blockchain infrastructure, though retail crypto activity continues to lag behind institutional momentum. A major reason for the yen's systemic significance is the carry trade — investors borrow cheap yen due to low interest rates, convert it into other currencies, and invest in higher-yield assets, making the yen one of the most trusted funding currencies in global markets.

Japan's Web3 Push Gains Political Momentum

Japan's drive toward crypto leadership has accelerated under Prime Minister Sanae Takaichi, who became the country's first female prime minister in October 2025. After dissolving the lower house for a snap election, her Liberal Democratic Party secured a two-thirds supermajority victory on February 8, and lawmakers voted to reelect Takaichi for a second term 10 days later. This political consolidation has given the LDP a strong mandate to pursue its blockchain agenda.

Startale Group CEO Sota Watanabe told reporters that Takaichi is widely perceived as politically and strategically aligned with the Trump administration, a dynamic that is speeding up local crypto adoption. US President Donald Trump's return to office in January 2025 accelerated crypto policy discussions worldwide, and Japan's ruling party has responded in kind. The LDP published a [Web3 white paper](https://www.taira-m.jp/The%20web3%20White%20Paper%202024%EF%BC%88English%2Cver%29.pdf) in April 2024 declaring its intention to "make Japan the center of Web3." That document identified 11 crypto issues for immediate resolution, spanning income tax reform for individuals, stablecoin frameworks, and security token regulation.

Those policy priorities closely mirror the blockchain strategy of SBI Group, one of Japan's largest financial conglomerates. Under the leadership of Yoshitaka Kitao, SBI has positioned itself at the forefront of institutional crypto development. Watanabe noted that Kitao is uniquely qualified to lead the crypto transformation in Japan because he built SBI during the internet's evolution. Kitao previously served in executive roles at Nomura, Japan's leading securities broker, and at SoftBank alongside Masayoshi Son, who ranks second on Forbes' Japan rich list. Kitao subsequently founded SBI for SoftBank.

Kitao-san is the best person to commit to the crypto revolution in Japan because he created SBI under the evolution of the internet.

— Sota Watanabe, CEO of Startale Group

What Are Yen Stablecoins and Why Does Japan Need Them?

A yen stablecoin is a digital token pegged to the Japanese yen, designed to operate on blockchain networks while maintaining a stable value tied to the underlying fiat currency. Japan needs yen stablecoins because its ambitions to tokenize securities, equities, and real-world assets cannot function without an onchain settlement currency. Dividends for tokenized onchain assets cannot be distributed offchain, making a yen-backed stablecoin a prerequisite for the entire ecosystem to operate as intended.

Watanabe explained that SBI envisions crypto's next evolution as the tokenization of securities and stocks, though that pathway requires government authorization. He noted that while creating derivatives onchain is straightforward today, implementing actual onchain dividends and voting rights demands full regulatory compliance. Watanabe confirmed that he is currently in discussions with Japanese government officials on this matter.

Startale Group and SBI co-developed the Strium blockchain, a layer-1 network designed to serve as settlement infrastructure for institutional trading of tokenized equities and real-world assets. The platform aims to provide the technical backbone that institutions need to move traditional financial instruments onto distributed ledgers with full regulatory compliance.

How Could Yen Stablecoins Enable the Carry Trade Onchain?

The yen carry trade could be revolutionized by stablecoins that bring Japan's low borrowing costs directly into DeFi markets. The Bank of Japan raised interest rates from -0.1% to 0.1% in March 2024, marking its first hike in 17 years. The central bank then announced a more aggressive increase to 0.25% the following July, a move that rattled global markets and sent Bitcoin tumbling. Japan's interest rate decisions and the yen carry trade are major forces capable of moving markets worldwide.

A yen-backed stablecoin would allow investors to borrow yen-denominated tokens at low interest rates, convert those funds into US dollar stablecoins, and deploy the capital into DeFi lending, liquidity provision, or other yield-generating strategies. On Friday, Startale unveiled its own yen-backed stablecoin, JPYSC, targeting a second-quarter launch. Watanabe said the token is specifically engineered to facilitate the yen carry trade onchain.

Traditional carry trades typically require one to two days to complete because Japanese and US business hours do not overlap. Watanabe argued that an onchain implementation would eliminate that friction entirely. He noted that once the trust bank-backed stablecoin launches, global investors and institutions could execute yen carry trades 24/7 and instantaneously, removing the delays inherent in traditional cross-border settlement.

Once we implement the trust bank-backed stablecoin, it will become possible for global investors and institutions to execute the yen carry trade onchain.

— Sota Watanabe, CEO of Startale Group

Skepticism and Competition in the Stablecoin Race

Not everyone is convinced that the onchain carry trade will immediately transform markets. Justin d'Anethan, head of research at Arctic Digital, told reporters that an onchain carry trade will not be impactful unless it comes with massive institutional backing and a large market capitalization. The concern highlights a chicken-and-egg problem: liquidity attracts institutions, but institutions are needed to create liquidity in the first place.

Watanabe disclosed that he has been in discussions with the largest financial institutions in the United States that are interested in carry trades and intraday swaps, though he declined to reveal specific names. He added that he has also been in contact with what he described as "top players" in DeFi. The process still requires approval from Japanese authorities, and the regulatory treatment of stablecoins on bank balance sheets remains an open question. Bodies such as the US Securities and Exchange Commission are still working to clarify capital and accounting requirements.

A yen-backed stablecoin already exists in the form of JPYC, but it is primarily designed for payments. With a relatively modest market capitalization of approximately $20 million, JPYC lacks the deep liquidity and large borrowing capacity required for carry trades. Meanwhile, three of Japan's biggest banks — Mitsubishi UFJ, Sumitomo Mitsui Banking Corporation, and Mizuho — are reportedly exploring a joint yen-pegged stablecoin, signaling that competition in this space is intensifying rapidly.

What This Means Going Forward

Japan's retail crypto sector remains constrained by tax rates as high as 55%, a burden frequently cited as the primary obstacle to broader adoption. However, the government is exploring the reclassification of crypto from a payment tool to a financial product, a shift that would lower the tax to 20% and potentially open the door for exchange-traded funds based on digital assets. That tax reform is expected to take effect starting in 2028.

Watanabe expressed frustration with the pace of change, arguing that a 2027 timeline for tax reductions is necessary given how quickly the United States is advancing onchain finance. For decades, the yen has served as a foundational global funding currency through the carry trade, yet it remains largely absent from the crypto industry. While retail participation continues to be held back by steep tax rules, the convergence of government policy, institutional capital, and stablecoin innovation suggests that yen-denominated blockchain markets may be closer than ever to reality.