Japan to begin digital securities trading next month

Osaka Digital Exchange will begin trading Japan’s first digital securities in the form of security codes issued by real estate companies Ichigo and Kenedix next month, benefiting from individual demand for alternative assets that might offer better returns.

Ichigo, based in Tokyo, will sell securities backed by real estate investments of about 3 billion yen ($20.1 million), with trading to begin on December 25, according to a disclosure to authorities.

Security codes are digitally managed securities, and their commencement on the exchange aims to increase liquidity and facilitate the placement of individual investors in them.

Although the relatively small volume of Ichigo sales suggests that market players are still testing the amount of demand for non-traditional securities, it is part of Japan’s campaign to sell riskier assets, but it offers higher returns to a rapidly aging population.

Japanese households’ financial assets exceeded 2000 trillion yen ($13 trillion) at the end of 2022, but more than half of their deposits typically offer near-zero interest rates, according to Bank of Japan data.

Other Asian markets are also pushing for rules that would open the door to further sales of security codes, with Hong Kong removing restrictions that limited its offers to professional investors and South Korea amending laws to allow their issuance and distribution.

Ichigo has previously issued digital securities to invest in residential properties, but they were small deals for individual investors and business owners.