Japan’s Financial Services Agency (FSA) is preparing to approve the issuance of the country’s first yen-backed stablecoin, with approval expected this autumn.

The stablecoin, JPYC, will be issued by Tokyo-based fintech firm JPYC and will maintain a fixed value of 1 JPYC = 1 Japanese yen.

According to CoinCentral, JPYC will be backed by highly liquid assets, including bank deposits and Japanese government bonds, to ensure its 1:1 peg to the yen.

The approval comes under the revised Payment Services Act, which defines stablecoins as “currency-denominated assets,” distinguishing them from virtual currencies.

The launch is expected to attract interest from institutional investors such as hedge funds and family offices, particularly for cross-border transactions and investment purposes.

JPYC aims to issue ¥1 trillion worth of stablecoins over the next three years.

A key anticipated use case is carry trades, which exploit interest rate differentials between currencies.

JPYC could also be used for international remittances, corporate payments, and asset management services, supported by blockchain technology.

The introduction of yen-backed stablecoins may have implications for Japan’s bond market. JPYC has noted that adoption could increase demand for Japanese government bonds (JGBs), since issuers are expected to hold JGBs as collateral, similar to the role of US Treasuries in supporting dollar-pegged stablecoins.

This could enhance bond market liquidity and potentially put downward pressure on interest rates.

Japan’s move signals a broader shift in its approach to digital assets.

By providing a regulatory framework for stablecoins, the FSA aims to support fintech innovation while maintaining financial stability and security.

Featured image credit: Edited by Fintech News Hong Kong, based on image by pranavkr via Freepik