🏛️ In the same month Japan's 10-year bond yield rose above 3% for the first time in 30 years, the Ministry of Finance set up a study group on whether Japanese government bonds (JGBs) could be settled on a blockchain. It meets for the first time on October 8. JGBs, however, already change hands against cash in a single linked step. What a blockchain could change sits around that step: a one-day gap before it, and the hours after 9 p.m.

Today, the bond changes hands the next business day

The ministry announced the Study Group on On-Chain Handling of Government Bonds on September 30, 2026. "On-chain" means recording and processing transactions on a blockchain, a kind of shared digital ledger (distributed ledger technology, or DLT). The group has five members: four university researchers and one private-sector market strategist. The Bank of Japan and the Financial Services Agency (FSA) sit in as observers.

According to Reuters, the group has instant settlement of JGB trades in mind and will weigh the pros and cons against the current practice of settling on the next business day.

That practice is called T+1. A trade agreed today settles one business day later, when the bond and the cash are exchanged. Japan moved JGBs to T+1 for trades from May 1, 2018. The push came from the 2008 financial crisis, which showed how exposed traders are to a counterparty collapsing between the trade and the settlement. A working group at the Japan Securities Dealers Association met 50 times between 2009 and March 2018 to get there. Getting to T+1 took the better part of a decade.

What instant settlement fixes, and what it costs

The moment of exchange is already protected. The Bank of Japan's settlement network, BOJ-NET, offers delivery versus payment (DVP): the bond transfer and the cash payment are linked, so neither goes through unless the other does.

Two gaps remain. One is the business day between the trade and the exchange. If a counterparty cannot pay during that window, the trade is left hanging. The other is the clock. Since February 2016, BOJ-NET has run from 8:30 a.m. to 9 p.m.

Closing those gaps is the promise of on-chain settlement. In a paper for a September 30 meeting, the FSA said on-chain DVP for securities could cut settlement risk through instant transfer, lighten back-office work, and eventually allow round-the-clock securities trading that draws in more overseas investors.

Speed also has a price. An October 2024 report by the Bank for International Settlements (BIS) found that removing the gap between trade and settlement means cash has to be lined up in advance, which can sharply raise liquidity costs. The report also warned that transactions triggered automatically by code could set off many money movements at once. According to SIFMA, the U.S. securities industry group, markets today offset trades against each other (netting) and move only the difference. Settling every trade one by one at full value would push up funding needs and costs.

Why now

The ministry has not explained why it is starting the study group now. Rates, though, are moving sharply. On September 1, the yield on the newly issued 10-year JGB, the benchmark for long-term rates, rose above 3%, a level last seen in September 1996. Finance Ministry data put the 10-year yield at 3.082% on September 29.

The harder prices swing, the more it matters if a counterparty fails in the day between agreeing a trade and completing it.

The FSA held the first meeting of its On-Chain Finance Forum for the AI Era on the same September 30, with the Finance Ministry, the Bank of Japan, the Digital Agency and the Japanese Bankers Association taking part. A second meeting in early 2027 is meant to agree a public-private roadmap. The Bank of Japan is already testing tokenized reserve deposits (related article). In the private sector, Mitsubishi UFJ Financial Group announced a trial in August to settle JGB repo trades, a form of short-term borrowing against bonds, with the bond and the cash moving together on a blockchain. The design keeps the bonds' legal status as book-entry JGBs and updates the official records in step with the chain.

How far other markets have gone

Reuters reported that a Finance Ministry official pointed to U.S. money market funds that hold Treasuries and trade on a blockchain. A well-known example is BlackRock's BUIDL, launched in March 2024. What sits on the blockchain, though, is a share in the fund, not the Treasuries themselves. The fund holds cash, Treasury bills and repurchase agreements.

Issuing government bonds directly on a ledger has already happened elsewhere, in Hong Kong. Its government issued a tokenized green bond in February 2023, then about HK$6 billion of digital green bonds in four currencies in February 2024.

The UK is one step short of issuing. It chose HSBC's Orion platform for its digital gilt, DIGIT, and as of July 2026 planned the first transaction by the first quarter of 2027. In the euro area, the European Central Bank (ECB) launched Pontes on September 21, a system that settles trades in tokenized assets in central bank money. Features will be added in stages, and the full version is due by 2028.

As for Japan, the FSA's own paper says that on-chain trading of securities held in the country's book-entry accounts, JGBs included, has not happened yet. We covered private-sector tokenized money in our report on the bank-backed dollar stablecoin.

Nothing has been decided yet

The study group is hosted by the deputy director-general of the ministry's Financial Bureau to hear views and advice from experts. Its meetings are closed, with summaries and materials to be published later. The ministry aims to sort through the discussion between December 2026 and January 2027. Japan has not decided to move its government bonds onto a blockchain.

Nor is it clear what kind of blockchain is on the table. A public network that anyone can join and a permissioned one limited to approved participants raise very different questions. The ministry's announcement does not say.

A market that took nearly a decade to reach T+1 has started talking about removing the last day. Where you live, how long after a trade do government bonds actually change hands?

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