Woofun AI reports that Japan is engineering a national blockchain-based settlement infrastructure for stocks and Japanese government bonds (JGBs), a strategic move attributed to the Bank of Japan (BOJ), the Financial Services Agency (FSA), and the Ministry of Finance. The Nikkei highlighted this coordination on Wednesday, signaling a decisive shift in how domestic capital markets will handle asset transfers.

The FSA, Ministry of Finance, and BOJ intend to launch a dedicated working group this summer, with substantive operations commencing by early 2027. If testing proceeds without major hurdles, the live onchain system is scheduled for deployment in the early 2030s. The mechanism involves converting portions of bank reserve accounts at the BOJ into digital tokens, effectively creating a wholesale central bank digital currency (CBDC) restricted to institutional use. Currently, Tokyo stock trades settle two business days after execution, while JGB trades settle the following day; the new infrastructure aims to reduce both timelines to near-zero, enabling immediate reinvestment of proceeds.

Market pressure is intensifying as global competitors accelerate tokenization efforts. A survey by Nomura and Laser Digital, published in April, revealed that nearly 80% of Japanese institutional investors plan to allocate capital to crypto within three years. The U.S. and Europe are rapidly modernizing capital markets, with Wall Street pushing toward 24/7 tokenized stocks. Without domestic innovation, Japan risks losing these critical investors to more agile jurisdictions.

Technical groundwork is already underway through major banking pilots. MUFG announced earlier this month that it is preparing a proof of concept for onchain JGB settlement using the Canton Network.

Concurrently, Japan's top three banks—MUFG, SMBC, and Mizuho—are running a pilot for tokenized stocks and JGBs. Per Woofun AI, the BOJ expanded its blockchain settlement sandbox in March to ensure interoperability between new CBDC efforts and legacy interbank and securities settlement infrastructure.

This domestic initiative aligns with broader international collaboration through Project Agorá, a Bank for International Settlements (BIS) initiative involving seven central banks and over 40 financial institutions testing tokenized cross-border payments. Japan's new settlement infrastructure could serve as a foundational layer for these global efforts. This marks a critical step in integrating traditional finance with distributed ledger technology.