Japan to Study Blockchain-Based Settlement for Stock, Government Bonds

Japan's top financial authorities are preparing to examine a blockchain-based settlement infrastructure for stocks and Japanese government bonds, with the goal of enabling instantaneous, round-the-clock settlement, Nikkei Asia reported. The Financial Services Agency, the Ministry of Finance, the Bank of Japan and local financial institutions plan to establish a study group this summer to examine the system's technical design and how responsibilities would be divided among participating agencies.

The group aims to formulate a development plan as early as the beginning of 2027. If the project proceeds through formal approval, the system could take several years to build, with operations potentially beginning in the early 2030s. Under the proposed structure, a portion of the reserve accounts that commercial banks hold at the Bank of Japan would be converted into digital tokens circulating on the new infrastructure, allowing securities and cash to change hands simultaneously on-chain.

Settlement in Japan currently runs on a T+1 cycle for government bonds and T+2 for stocks, meaning trades take one to two business days to finalise after execution. That delay ties up cash and collateral in the interim, a cost that becomes more significant as interest rates rise. Japan has narrowed this window before: JGB settlement moved to one day in 2018, and stock settlement moved to two days in 2019. The United States shortened its equity settlement cycle from T+2 to T+1 in 2024. A move to real-time settlement would put Japan ahead of both prior benchmarks rather than simply matching them.

The scale involved is substantial. Japan held roughly ¥1,166 trillion, or about $7 trillion, in outstanding government bonds and bills as of the most recent Ministry of Finance figures, while the Tokyo and Nagoya exchanges processed a combined ¥3.39 quadrillion in trading volume over the last fiscal year.

The study group builds on work already underway at Japan's largest banks. Four of the country's major lenders have been running a blockchain-based collateral trial for JGBs since April, and in February the FSA's Payment Innovation Project backed a separate demonstration involving Nomura Securities, Daiwa Securities, Mizuho, MUFG and Sumitomo Mitsui, testing the transfer of securities rights on blockchain linked to stablecoin-based settlement. JPMorgan confirmed in August that it will separately test real-time blockchain settlement for JGBs through its Kinexys unit, while MUFG has begun its own pilot on the Canton Network for JGB repo trades.

Regulatory changes are moving in parallel with the infrastructure work. Japan passed amendments in July reclassifying roughly 105 cryptocurrencies as financial instruments starting in fiscal 2027, and the FSA created a dedicated cryptocurrency and stablecoin division earlier this month. Taken together, the settlement study, the bank-led pilots and the regulatory reclassification point to a coordinated push to build blockchain infrastructure into the core of Japan's financial market rather than treating it as a peripheral experiment. The plan still requires formal approval, and any launch remains years away, but the timeline attached to it, and the list of institutions already running parallel trials, marks a departure from Japan's earlier, more exploratory blockchain projects.