Japan’s Financial Services Agency (FSA) announced on 7 November 2025 that it will back a pilot project in which major banks will issue a yen-pegged stablecoin. The initiative will see Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Financial Group (SMBC), and Mizuho Financial Group collaborate to issue the stablecoin.
This initiative will run under the FSA’s newly established Payment Innovation Project (PIP), designed to test emerging payment technologies inside a regulatory sandbox-style regime. The three banking giants, MUFG, SMBC, and Mizuho, will collaborate on the issuance and transfer infrastructure of the stablecoin. While the coin will initially be pegged to the Japanese yen, reports suggested that there are plans for a U.S. dollar version down the line. The pilot aims to streamline cross-border payments and corporate transfers leveraging blockchain/digital-asset rails, under regulatory supervision.
Japan’s regulatory stance on stablecoins
Japan has been moving cautiously but definitively into the digital-currency space. Its regulations treat fiat-backed ‘digital-money’ or stablecoins as financial instruments requiring registration with the FSA. Moreover, Japan already saw the launch of a yen-pegged stablecoin by fintech JPYC in October 2025, backed by government bonds and domestic deposits.
In fact, JPYC, even though private, is set to run on several blockchains, such as Ethereum, Polygon, and Avalanche. At launch, users won’t be charged transaction fees, as the team plans to earn revenue through interest generated from its reserve holdings. The regulator, however, has a close eye on all developments surrounding the digital asset space. It continues to emphasise robust compliance, reserve backing, and systemic stability.