Stablecoin Backed by Yen Launches Amid Expectations of BOJ Rate Increase

Japan is set to introduce its first yen-backed stablecoin just as the Bank of Japan (BOJ) prepares to raise interest rates, a development likely to boost demand for both the yen and JPY-linked digital assets.

Tokyo fintech firm JPYC plans to register as a money transfer business this fall, spearheading a stablecoin pegged 1:1 to the Japanese yen. The Financial Services Agency (FSA) is expected to approve the project shortly. Stablecoins like these enable trading, remittances, and cross-border payments while reducing exposure to cryptocurrency volatility.

Monex Group is also exploring a JPY stablecoin aimed at corporate settlements and international transfers. Chairman Oki Matsumoto highlighted the urgency: “Issuing stablecoins requires infrastructure and capital, but if we don’t handle them, we’ll be left behind.”

The BOJ is widely expected to hike rates in Q4, in contrast to the U.S. Federal Reserve’s more dovish approach. Rising rates, supported by Tokyo’s inflation data, could strengthen the yen and drive demand for yen-pegged stablecoins, echoing the surge in USD-backed stablecoins seen in 2022.

Longer-term Japanese government bond yields are climbing, with the 30-year JGB surpassing 3.2% and the 10-year at 1.64%, marking multi-decade highs. This narrowing of the yield gap with U.S. bonds signals potential yen appreciation.

In crypto markets, BTC/JPY has fallen 8% this month, forming a double-top bearish pattern. Technical analysis suggests further downside toward 14.92 million JPY, underscoring the potential appeal of stablecoins as a hedge against yen volatility.

With the JPYC launch and anticipated BOJ rate hike, Japan could see accelerated adoption of JPY-denominated digital assets, particularly in trading and corporate finance.