Japan is advancing a policy framework to digitize local government bonds through security tokens, with legislation slated for submission to the Diet in 2026. Officials will finalize policy directions this month to align with municipal needs and market readiness, per Nikkei via CoinDesk.

Industry observers note that blockchain-based municipal bonds could enable intermediary-free issuance and rapid settlement, while providing real-time visibility into investor data. The model enables flexible rewards—monetary returns, non-monetary benefits, and social contributions—to broaden participation in direct financing at the local level.

While practical deployment will require regulatory safeguards, the initiative could establish Japan as a regional sandbox for digital municipal bonds and related security token applications, with regulators monitoring timelines as the Diet process unfolds.