Toyota Cut Out the Securities Firm — A Self-Offered Digital Bond That Makes Intermediaries Unnecessary by Giving Up Liquidity

The Terms, and What Changed From the First Issue

The offering period runs from August 18 to 17:00 on September 2, with issuance on October 27 and redemption on October 27, 2027. Each bond is denominated at ¥100,000, with applications accepted from ¥100,000 up to ¥99.9 million. Japan Credit Rating Agency has assigned its top AAA rating. The formal designation is the Second Series Unsecured Security Token Bonds, carrying a limited pari passu clause and transfer restrictions, meaning they cannot in principle be sold before maturity. The product is branded "TOYOTA Wallet Tsumugu Bond."

The first issue was offered from February 20 to 27, 2025 and issued on March 3, totalling ¥1 billion across 10,000 units of ¥100,000 each. It sold out immediately after the offering opened. Daiwa Securities was underwriter, MUFG Bank served as bond administrator, Mitsubishi UFJ Trust as bond register administrator, and the platform was Progmat (SaaS).

For the second issue, that line-up has been almost entirely replaced. The platform is ibet for Fin, the consortium blockchain provided by BOOSTRY; SMBC Nikko Securities is financial adviser; and Sumitomo Mitsui Banking Corporation is bond administrator. The most significant change is that there is no underwriter and no selling agent. SMBC Nikko's role stops at advisory; it does not distribute. Individuals aged 18 or over resident in Japan can apply directly without a brokerage account, provided they hold a TOYOTA Wallet account and complete investor registration and identity verification on a dedicated application page. Payment is only by online direct debit from a bank account in the applicant's own name; credit cards are not accepted, so those without Toyota Finance's TS CUBIC CARD can also participate.

Why the Securities Firm Can Be Removed

The legal architecture matters here. A tokenised corporate bond falls under the Financial Instruments and Exchange Act as an electronically recorded transferable security, and where the underlying is a Paragraph 1 security such as a share or bond, the Japan Securities Dealers Association classifies it as a tokenised security. The critical question is the treatment of self-offering, where the issuer solicits subscriptions itself. For electronically recorded transferable rights — tokenised collective investment scheme interests and similar — self-offering requires registration as a Type II financial instruments business. For an issuer's own corporate bonds, by contrast, solicitation by the issuer itself is not treated as a regulated financial instruments business. Solicitation by a third party on the issuer's behalf constitutes handling of an offering and requires registration; solicitation by the issuer does not.

In other words, the securities firm can be removed not because of any technological advance but because the law already permitted it. Why, then, was it not done before? Because issuers had neither a channel to investors nor the machinery to process identity verification and applications. Toyota Finance has TOYOTA Wallet, a payments application, and connected investor registration and verification to it. What the blockchain platform contributes is the bond register and real-time visibility of holders, which is what allows application, holder communication and perk delivery to be designed as a single flow. That integration is precisely the reason the company gives for choosing self-offering.

The Design Works Because Liquidity Was Surrendered

There is, however, a premise that should not be overlooked: the bonds carry transfer restrictions and cannot in principle be sold before maturity.

The usual pitch for tokenisation is that fractionalisation and improved transferability bring markets to assets that were previously hard to trade. This bond is the opposite: it is designed on the assumption that it will not circulate. And that is exactly what allows the securities firm to be removed. With no secondary market, there is no need for anyone to intermediate trades, quote prices, or service secondary-market customers. The issuer manages only two points, subscription and redemption. The benefit of dispensing with a securities firm is obtained in exchange for surrendering liquidity.

As Daiwa Institute of Research notes, retail bond investors in Japan generally hold to maturity, so the practical detriment may be limited. But investors need to understand accurately that this is not a bond made more convenient by digitisation, but a bond designed on the premise that it will not circulate.

Perks as a Second Yield

The coupon is 1.720% per annum before tax, but that is not the whole of the economic value. Purchasers receive TOYOTA Wallet balance, plus lottery-based perks including Fuji Speedway race tickets and test drives of selected LEXUS, GR and classic Toyota vehicles. Purchasers of new Toyota or Lexus vehicles also receive TOYOTA Wallet balance under specified conditions.

On the first issue, the structure was tiered: ¥1,000 for purchases from ¥100,000 to under ¥400,000, ¥5,000 from ¥500,000 to under ¥900,000, and ¥10,000 for ¥1 million and above. This has a structural feature worth noting. At the lower bound of each tier the return is 1.0%, but it declines toward the upper bound — 1.0% at ¥100,000, 0.25% at ¥399,000. Smaller investors therefore earn a higher effective yield and larger ones a lower one. Given a one-year bond with a 1.720% coupon, the effect of the perks on effective yield is not negligible. Note that the perk details for the second issue were not finalised at announcement; the figures above are from the first issue.

Where This Sits in the Wider Market

Japan's security token market is expanding. Progmat materials dated April 2026 put outstanding domestic ST deals above ¥674.7 billion and cumulative ST issuance above ¥355.2 billion, projecting growth within 2026 to over ¥1,053.1 billion outstanding and ¥522.5 billion cumulative. Nomura Holdings forecasts publicly offered ST issuance of ¥200 billion in fiscal 2026 alone and ¥530 billion cumulatively. The bulk of that, however, is real estate ST; bond ST remains at a scale that Daiwa Institute of Research describes as still in a trial phase. The ¥1 billion size of this issue should be read in that context.

[Business Development Insights]

1. For operating companies with a direct customer channel, self-offering has become a realistic funding route. Bypassing the securities firm structurally eliminates underwriting and distribution fees. In exchange, the issuer must internalise identity verification, investor registration, suitability assessment, and complaint and dispute resolution. Toyota Finance already possessed these functions as a credit card business. The corollary is that this approach is available only to operating companies that already hold a customer base and an identity verification capability. The implication for financial institutions is whether they can reposition to supply the operational infrastructure for self-offering rather than the underwriting. The configuration here — SMBC Nikko as financial adviser, SMBC as bond administrator — reads as an early form of that transition.
2. Securities firms' revenue model shifts from distribution fees to administration, advice and infrastructure. The underwriting and distribution functions Daiwa performed on the first issue simply vanished on the second. What remains is advisory work and the bond administrator role, both relatively low-value services. Per-transaction economics decline, though volume could compensate if the number of issuers grows. As long as a securities firm defines its reason for existing as owning the customer, it cannot compete with self-offerings by operating companies that own the customer themselves. The required judgement is to redefine the business around unbundled specialist functions: disclosure documentation, ratings, pricing and bond administration.
3. Tokenisation's value proposition should be evaluated separately from liquidity. This product carries transfer restrictions and presumes no secondary market. It works nonetheless because tokenisation's benefit here is not liquidity but real-time visibility of holders and the continuous customer relationship built on it. An institution that makes "does liquidity improve" its evaluation criterion for tokenisation projects cannot assess deals of this kind. What actually generates value is access to the register itself — the issuer's ability to know continuously who holds what and how much. That lens applies beyond bonds, to real estate and fund tokenisation as well.

[Sources]

• Atarashii Keizai, "Toyota Finance to Issue Digital Bond in Toyota Group's First Self-Offering" https://www.neweconomy.jp/posts/600460
• Toyota Finance, "Issuance of Unsecured Security Token Bonds" (August 18, 2026) https://www.toyota-finance.co.jp/newsrelease/entry/news_20260818.html
• Toyota Financial Services (PR TIMES), "Toyota Group's First Security Token Bond (TOYOTA Wallet ST Bond) to Be Issued" https://prtimes.jp/main/html/rd/p/000000005.000156589.html
• CoinPost, "Toyota to Issue Group's First Blockchain-Based Bond (TOYOTA Wallet ST Bond)" https://coinpost.jp/?p=593215
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• Daiwa Institute of Research, "Daiwa's Security Token Navi, Part 5: What Are Bond Security Tokens? (Second Half)" https://www.dir.co.jp/report/research/capital-mkt/it/20260327_025667.html
• Progmat, "Publication of the Interim Summary on Tokenised Equities and a Tokenisation Act" (April 7, 2026) https://progmat.co.jp/
• Nomura Holdings, "Publication of the Domestic Security Token Market Overview Report (FY2025)" https://www.nomuraholdings.com/jp/news/nr/bstr20260402.html
• BOOSTRY, "ibet for Fin Consortium" https://www.ibet.jp/ibet-for-fin
• GVA Law Office, "Legal Commentary Series: STO Law, Part 2" https://gvalaw.jp/blog/c20221129/
• PwC Japan, "The Substantive Legal Position of Security Tokens and Related Regulation" https://www.pwc.com/jp/ja/knowledge/prmagazine/pwcs-view/202303/43-06.html
• Japan Security Token Offering Association, "Introduction to STO" https://jstoa.or.jp/investor/sto/