Japan's 367-member consortium targets JPY 106 trillion bilateral JGB repo for tokenisation
Key points
- The Digital Asset Co-Creation Consortium, a 367-member body run by Progmat, has published an interim report proposing tokenised JGBs for on-chain repo settlement.
- Japan's JGB repo market totals around JPY 250 trillion ($1.6 trillion); the bilateral, non-JSCC-cleared segment targeted by this initiative represents approximately JPY 106 trillion, or roughly 40% of that total.
- A testnet simulation using Canton Network runs from November through March, connecting multiple domestic and overseas repo and collateral platforms.
- Bilateral repo in Japan is often confirmed by fax and email via tanshi houses; non-resident settlement windows close early, requiring London and New York counterparties to instruct a day ahead.
- Large domestic banks already access interest-free intraday liquidity from the Bank of Japan, so the practical case for distributed ledger settlement concentrates on non-residents, trust-custody funds, and firms needing out-of-hours funding.
A 367-member industry body called the Digital Asset Co-Creation Consortium, operated by Progmat, has released an interim report proposing the use of tokenised Japanese government bonds (JGBs) for on-chain repo settlement. Rather than targeting the automated core of the market, the initiative focuses on the roughly 40% of Japan’s JGB repo market, estimated at around JPY 106 trillion, that settles bilaterally outside the Japan Securities Clearing Corporation (JSCC). A simulation using test tokens on Canton Network‘s testnet is scheduled to run from November through March, connecting multiple domestic and overseas repo and collateral platforms.
The bilateral segment the consortium is targeting operates very differently from the JSCC-cleared majority. Trades are frequently confirmed by fax and email, intermediated by securities firms and tanshi houses, Japan’s money market brokers. Participants here include those excluded from central clearing: non-residents, life insurers, and regional banks. A particular structural constraint bears on cross-border participants, since Japan’s automated matching for non-resident trades closes before 1pm Tokyo time and the settlement window ends at 4:30pm, forcing London and New York counterparties to finalise instructions a day in advance.
Intraday repo is once again the headline use case, a position it has held since the first tokenised collateral platforms launched roughly five years ago, though international take-up has remained limited and volumes elsewhere have concentrated in overnight and term trades. The working group is candid about a core tension: large domestic banks already receive interest-free intraday liquidity from the Bank of Japan, so the distributed-ledger case rests primarily on those outside that arrangement, specifically non-residents, funds held in trust custody, and firms needing foreign currency or funding beyond normal settlement hours. Whether that constituency is large enough to sustain commercial momentum is the question this simulation will need to help answer.