Why Japan is Embracing Crypto Rapidly

Japan, once an economic powerhouse, has been grappling with economic stagnation since the early '90s. The country, which missed out on the Web2 revolution — by failing to produce its own Meta, Google, Amazon, and Alibaba — is now looking to regain its economic prowess by embracing the burgeoning crypto and Web3 industry. In this regard, the Japanese government has already recognized the potential of this sector, so much so that it has made Web3 a major part of its national strategy. 

For starters, in September 2022, the government published a white paper — which has since been approved — discussing the implementation of several future-ready technologies, including blockchain, central bank-backed digital currencies (CBDCs), etc, into its existing governance and technological frameworks.

As a result, a number of reputable Japanese firms, such as Toyota, Sony, and NTT, have showcased a keen interest in various decentralized offerings. Not only that but moving ahead, decision-makers in Japan see the Web3 paradigm as the next big opportunity for local companies to forge ahead and stand at the forefront of the global economy.

A Look at Japan’s Crypto Ambition

Japan's ambition to become a leader in the Web3 industry seems to be driven by its need to compete internationally and to counteract a shrinking domestic market due to an aging population. Japanese companies are being encouraged to invest more in software and create platforms — possibly on the blockchain — to grow the nation’s economic influence outside of the country.  

Moreover, the Asian powerhouse is also looking to leverage its world-class intellectual property in manga, anime, and computer games in the Web3 space, particularly through NFTs. However, there is a knowledge gap, with many creators unsure of how to deploy their creations on the blockchain.

To this point, Sota Watanabe, the founder of Astar Network and a member of the Japanese Government's web3 task force, recently explained: "A lot of digital creators, gaming companies would like to work on Web3, especially NFTs. But the problem is they don't know how to.”

The Digital Yen Initiative - A Gamechanger?

In a move that further underscores Japan's commitment to the crypto revolution, the Japanese government announced late March that it is considering forming a panel to examine the advantages of a digital Yen. The Bank of Japan (BOJ) is set to move ahead with a pilot program for a digital currency, and the Finance Ministry's expert panel will debate how to design an institutional ecosystem for the digital yen.

The BOJ has been conducting proof of concept tests on the digital yen since 2021, focusing on issuing and circulating the currency, among other basic functions. The initial rounds of tests were recently concluded, and recently the central bank has been conducting field tests with private-sector banks. This initiative is part of a global trend, with several countries ramping up studies of central-bank-issued digital currencies.

Embracing Globalization: The Need for International Collaboration

As Japan embarks on its journey to become a global leader in the Web3 industry, its need for international collaboration has become quite evident. The country's ambition to regain its economic prowess and compete on the global stage requires not just domestic efforts but also strategic partnerships with international entities. 

To this point, Watanabe rightly pointed out recently that the country’s lack of an English-speaking population is somewhat of a hindrance when it comes to posturing Japan as a major hub for global technical innovation, adding:

"We have a bunch of other people who understand Japanese business and can speak Japanese, but we don't have many people who understand the global business and who can speak English very well."

The Road Ahead

Despite the enthusiasm and some recently launched Web3 initiatives, there are still many challenges that Japan needs to overcome to become a world leader in this space. Firstly, the country needs to produce at least one groundbreaking Web3 company, and secondly, it needs to introduce more regulatory clarity to attract more entrepreneurs. On the need for a successful global use case, Watanabe added: 

"In the age of Web3, we have to make something new. We have to make a very innovative company that can become big, just like Sony or Toyota. If we cannot make it, I think our economy is going to shrink...So it is really important for Japan to make at least one successful use case within the Web3 arena."

Therefore, as move toward a future driven by decentralized technologies, Japan's rapid embrace of crypto and Web3 seems to be a strategic move — seemingly in the right direction — to regain its economic prowess and compete on the global stage. And while the country is making significant strides the journey ahead will most likely be fraught with challenges that need to be addressed to ensure continued, guaranteed success.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.