Japan’s Bold Vision: LDP Proposes Five-Pillar Blockchain Strategy to Secure Financial Future
By Ariel, CryptoCity
Japan is making an assertive move into the blockchain era. The ruling Liberal Democratic Party’s (LDP) Parliamentary League for Promoting Blockchain Technology recently submitted a comprehensive set of policy recommendations to the government. These proposals underscore Japan’s commitment to leveraging blockchain, advocating for the widespread adoption of JPY stablecoins for Asian settlements, the establishment of a robust legal framework for cryptocurrency ETFs, and a powerful declaration: “On-chain finance must be recognized as a national strategy.” The recommendations have been presented to Satsuki Katayama, Japan’s Minister of Finance, who also oversees the Financial Services Agency (FSA).
Pivotal Reforms: The Five Core Pillars of Japan’s Blockchain Policy
The LDP’s Blockchain Promotion Parliamentary League has outlined its strategic vision across five critical domains:
Strengthening Regulatory Oversight for Offshore Exchanges and DeFi
The LDP’s recommendations emphasize the urgent need to bolster measures against unregistered cryptocurrency operators. Currently, significant regulatory blind spots exist, particularly concerning investment solicitations via media and influencers, and fund transfers facilitated by domestic payment providers. To address these vulnerabilities, the LDP urges the government to enhance collaborative enforcement efforts with international regulatory bodies and to clearly define legal restrictions on “stealth marketing.”
Furthermore, the proposal calls for a proactive approach to Decentralized Finance (DeFi) services. It recommends that the government initiate discussions on establishing clear market discipline and regulatory boundaries, ensuring that innovation in the DeFi space is balanced with robust risk control.
- Related Insight: Japan’s FSA has previously taken decisive action, demanding Apple and Google remove apps from certain unregistered exchanges.
Reforming Cryptocurrency Taxation for Clarity and Competitiveness
The LDP acknowledges the 2026 tax reform’s commitment to introducing separate taxation for declarations and advocates for further exploration into mechanisms that grant investors the flexibility to choose between separate taxation for declarations and taxation at source (withholding tax).
- Key Development: Reports suggest Japan’s crypto tax could be reduced to 20%, with plans to classify 105 tokens as financial products and mandate regular disclosure for ICO projects.
Additionally, the proposal urges a review of taxation methods for cryptocurrency-to-cryptocurrency exchanges, alongside clarifying standards for inheritance and gift taxes involving digital assets.
- Minister Katayama’s Outlook: Minister Katayama indicated that if the relevant legislation passes in the current Diet session and industry infrastructure is established, a new tax system could potentially be implemented by January 2028.
Paving the Way for Cryptocurrency ETFs
Following the Cabinet’s April approval of an amendment reclassifying cryptocurrencies from mere payment tools to legitimate financial products, the LDP is pushing for the next crucial step. The party calls upon the government to establish a clear legal framework for cryptocurrency Exchange Traded Funds (ETFs). This move aims to position crypto ETFs as recognized investment vehicles, aligning Japan with leading global markets such as the United States and Hong Kong, all while ensuring robust investor protection and market integrity.
- Minister Katayama’s View: Minister Katayama acknowledged the high market demand for cryptocurrency ETFs and stated that their technical implementation is not complex. She anticipates their early realization, in conjunction with the transfer timeline under the Financial Instruments and Exchange Act.
Revisiting Leverage Limits for Crypto Derivatives Trading
Currently, individual cryptocurrency derivatives trading in Japan is capped at a 2x leverage ratio. The LDP’s proposal suggests a phased increase to a more appropriate ratio, integrating this adjustment with enhanced margin management and other systemic designs. This aims to foster a more competitive domestic trading environment.
- Industry Feedback: House of Representatives member Junichi Kanda highlighted survey data indicating that approximately 70% of respondents would consider shifting their trading back to domestic operators if leverage limits were relaxed to 6-10x. Minister Katayama concurred, acknowledging that the current 2x limit is indeed low.
Forging a Clear CBDC and Stablecoin Strategy
The recommendations call for the government to establish a definitive roadmap for Central Bank Digital Currencies (CBDCs) and stablecoins. This strategy extends beyond mere financial system reform, envisioning widespread application in the real economy. It advocates for a complete transition to electronic data-driven operations in critical sectors like trade and logistics, significantly expanding the practical adoption of blockchain technology.
Crucially, the government is urged to clarify the legal standing of stablecoins, meticulously evaluating their feasibility for salary payments and tax remittances. To champion cross-border stablecoin payments, the proposal demands accelerated development of regulations for bank-issued stablecoins and the establishment of internationally interoperable standards.
Proactive Steps: Japan’s FSA is already actively backing a joint experimental project involving the nation’s three largest banks to issue stablecoins, signaling a concerted push towards a new era of digital payments.
Why On-Chain Finance is Japan’s National Strategic Imperative
Seiji Kihara, Chairman of the LDP’s Next-Generation AI and On-chain Finance Concept Project Team, recently articulated the profound reasons behind positioning on-chain finance as a national strategy in an interview with NADA News.
Kihara emphasized that the global shift towards on-chain ecosystems poses a potential threat to Japan’s financial and monetary sovereignty. He underscored the critical need for Japan to secure its leadership in the financial domain, citing the growing dominance of USD stablecoins and the aggressive development of tokenized deposits by U.S. financial giants like JPMorgan.
To counteract the risk of Japanese enterprises being drawn into a USD stablecoin-centric economy, potentially leading to capital outflow, the development of JPY-based on-chain financial instruments is paramount. Kihara further highlighted the geopolitical dimension, noting that China’s digital yuan, particularly if integrated with quantum cryptography, presents a significant challenge. Japan, he argued, must offer viable alternative financial options to its Asian neighbors.
Domestically, a clear governmental directive will streamline investment, preventing redundant spending on both traditional and nascent on-chain financial systems, and will catalyze the transformation of banks into dynamic platform providers.
JPYC’s Rapid Growth Signals Japan’s Regional Ambitions
Japan’s domestic stablecoin market is experiencing robust growth. JPYC, a prominent JPY stablecoin, announced that its cumulative issuance and redemption platform volume surpassed 3 billion JPY as of June 2nd, with over 19,000 accounts opened. This remarkable milestone was achieved in approximately seven months since its official launch in October 2025.
Given Asia’s critical role as a trade partner for Japan and the Japanese Yen’s significant share in regional settlements, the widespread promotion of JPY stablecoins and on-chain finance holds immense potential. It is expected to further solidify Japan’s trade advantages and economic influence across Asia.
Junichi Kanda, a member of the House of Representatives, revealed after his meeting with Minister Katayama that Japan plans to leverage its hosting of the Asian Development Bank Annual Meeting next May to actively promote JPY stablecoins and showcase its advancements in blockchain innovation. By spotlighting these cutting-edge technologies, Japan is strategically positioning itself to lead the development of Asia’s next-generation financial system.
(This content is excerpted and reproduced with authorization from our partner, CryptoCity.)
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