Japanese Banks and Securities Firms Plan 24/7 Tokenized Bond Trading System by Year-End

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Japanese Banks and Securities Firms Plan 24/7 Tokenized Bond Trading System by Year-End

A consortium of Japan’s largest banks and securities firms is moving forward with plans to launch a 24/7 trading system for tokenized government bonds by the end of 2025, according to a report from Nikkei. The initiative represents a significant step toward modernizing Japan’s bond market infrastructure through blockchain technology.

From T+1 to T+0 Settlement

The core of the project involves issuing government bonds as blockchain-based digital securities, known as security tokens, and settling transactions using stablecoins. This would shift the current settlement cycle from T+1 to T+0, enabling same-day settlement for the first time in Japan’s government bond market. The initial focus will be on the repurchase agreement (repo) market, a critical component of short-term funding for financial institutions.

As of the end of 2024, the global repo market was valued at approximately $16 trillion, with Japan accounting for roughly 10% of that total. By tokenizing these instruments, the consortium aims to reduce settlement risk, improve capital efficiency, and open the door to broader participation in the bond market.

Progmat and the Consortium

A development organization is scheduled to launch in May, centered around Progmat, a stablecoin platform operated by Mitsubishi UFJ Financial Group (MUFG). The consortium includes Japan’s three megabanks—Mitsubishi UFJ Bank, Sumitomo Mitsui Banking Corporation, and Mizuho Bank—alongside Tokio Marine Holdings, Daiwa Securities, SBI Securities, BlackRock Japan, and State Street.

This broad coalition of domestic and international financial institutions signals strong institutional support for the project. The involvement of BlackRock Japan and State Street also highlights growing global interest in Japan’s digital securities market.

Why This Matters for the Market

The move toward 24/7 trading and same-day settlement addresses longstanding inefficiencies in bond markets. Currently, bond trades typically settle one business day after execution, exposing counterparties to overnight risk. By enabling instant settlement through stablecoins, the consortium aims to reduce that risk and free up capital that is currently tied up in settlement cycles.

For investors, faster settlement could lower transaction costs and improve liquidity. For the broader financial system, it represents a step toward the real-time, always-on infrastructure that other asset classes are increasingly adopting.

Conclusion

Japan’s push to tokenize government bonds and operate a 24/7 trading system reflects a broader trend among major economies to modernize legacy financial infrastructure using blockchain technology. If successful, the initiative could serve as a model for other countries exploring digital securities and stablecoin-based settlement systems. The consortium’s target of launching by the end of 2025 sets an ambitious timeline, but the involvement of Japan’s largest financial institutions provides credibility and resources to see the project through.

FAQs

Q1: What is a tokenized government bond?
A tokenized government bond is a traditional government debt instrument that is issued and traded on a blockchain as a digital security token. This allows for faster settlement, 24/7 trading, and potential cost savings compared to traditional bond issuance and trading.

Q2: What role do stablecoins play in this system?
Stablecoins are used to settle transactions in the tokenized bond market. Because they are pegged to a stable asset like the yen, they provide a reliable medium of exchange for instant settlement, enabling the shift from T+1 to T+0 settlement cycles.

Q3: Why is the repo market the initial focus?
The repo market is a large, highly liquid segment of the bond market where institutions borrow and lend short-term cash against collateral. Tokenizing repo transactions can significantly reduce operational risk and improve efficiency, making it an ideal starting point for the new system.

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