Beyond Prime Real Estate: How Japan is Rewiring its Capital Markets with Tokenized Assets
Japan’s security token (ST) market is quietly undergoing a massive transformation. What began as a niche experiment in digitizing prime Tokyo real estate has ballooned into a market exceeding 130 billion yen, drawing in major financial institutions and retail investors alike.
However, as the market matures, industry leaders are warning that outdated regulations and fragmented settlement infrastructure could bottleneck the next phase of growth.
In a panel discussion hosted at SBI R3 Japan's "Bridging TradFi and Web3" event during Japan FinTech Week, Takahiro Saito of Daiwa Securities and Tatsuya Saito of blockchain infrastructure provider Progmat laid out the bull case for Real World Assets (RWAs), while issuing a stark call for regulatory reform.
The Real Estate Tokenization Boom
The most visible success in Japan’s tokenized economy has been in real estate. According to the panelists, the market has rapidly diversified. Issuers have moved beyond simply tokenizing marquee office buildings in Tokyo's Marunouchi district, pivoting toward regional projects in Osaka, luxury hotels, and smaller-scale developments.
Crucially, the investor base is shifting. Through platforms operated by digital asset management firms and crowdfunding sites, retail investors are aggressively entering the space. Adding a uniquely Japanese flavor to the market, issuers are increasingly attaching "shareholder perks" to these tokens—such as discounted hotel stays for token holders—which has proven highly effective in driving retail demand and securing rapid sell-outs.
The Mutual Fund Bottleneck: A Call for Legal Reform
While real estate thrives, the tokenization of mutual funds and Money Market Funds (MMFs) is hitting a regulatory wall.
Globally, players like BlackRock have made headlines with tokenized funds like BUIDL, which offer instant, 24/7 liquidity. Japan, however, is hamstrung by its Investment Trust Act. Currently, Japanese law does not legally recognize the transfer of a token as the official transfer of a mutual fund trust right.
"To achieve true tokenized MMFs with instant secondary market liquidity, the law must be amended," the panelists noted. Without a legal framework that treats token transfers with the same finality as traditional book-entry transfers, the market is forced to rely on clunky workarounds that defeat the purpose of blockchain's instantaneous settlement.
The Settlement Conundrum: Stablecoins vs. Bank Deposits
As tokenized assets proliferate, the mechanics of how they are bought and sold—specifically Delivery versus Payment (DvP)—has become a hotly debated topic.
While regulatory sandboxes are currently testing the use of stablecoins and tokenized deposits for settlement, the panelists suggested a pragmatic approach for the domestic market. Rather than waiting for a fully mature stablecoin ecosystem, integrating token networks directly with traditional bank deposits may be the most efficient way to facilitate seamless domestic transactions in the near term.
However, the lack of a unified, highly liquid secondary market remains a pain point. While venues like the Osaka Digital Exchange (ODX) exist, trading volumes remain constrained by a lack of seamless, real-time fiat settlement options.
The Public Blockchain Imperative
Looking ahead, the panelists agreed that for Japan to attract serious foreign institutional capital, the market must eventually migrate from private, consortium-based blockchains to public blockchains.
Tatsuya Saito offered a sharp analogy: Currently, Japan’s private blockchain networks function like "private dirt roads." While they work for domestic, closed-loop transactions, attracting global liquidity requires building a "public highway."
Moving tokenized assets onto public chains (such as Ethereum or Avalanche) introduces new compliance and privacy challenges, but the panelists concluded that it is an unavoidable evolution if Japan hopes to position itself as a global hub for tokenized finance.
As the 130 billion yen market looks toward its next growth milestone, the ball is firmly in the court of Japanese regulators to modernize the Investment Trust Act and pave the way for a truly borderless digital capital market.
Norbert Gehrke
