Japan’s adoption of Web3 technology looms as the ruling party faces threats to its stability.

Prime Minister Fumio Kishida, leader of the Liberal Democratic Party (LDP) in Japan, previously hailed Web3 as a “new form of capitalism.” However, with the party facing challenges and Kishida confronting a leadership election in September, the future of Japan’s Web3 policies is uncertain.

Under Kishida’s leadership, Japan’s government has been actively involved in promoting Web3 development and implementing regulations for the crypto sector. Nevertheless, the LDP’s popularity has dwindled, facing a record-low support level amid a major corruption scandal, which casts doubt on Kishida’s political future and, consequently, the trajectory of Japan’s Web3 initiatives.

The LDP, a dominant political force in Japan for nearly 70 years, is bracing for by-elections this month and a crucial party leadership election in September. Some political analysts speculate that Kishida, who previously endorsed Web3 as a transformative force, could be replaced as party president and prime minister.

Despite the political turbulence, Kishida’s administration has made significant strides in advancing Japan’s Web3 agenda. In 2023, Japan became one of the leading jurisdictions to regulate stablecoins, viewing them as a catalyst for economic growth amidst global crypto market turmoil. Kishida’s cabinet established a dedicated Web3 project team, which released a white paper outlining strategies for national non-fungible tokens (NFTs) and decentralized autonomous organizations (DAOs). Additionally, proposed initiatives include corporate tax cuts and facilitating crypto investments by venture capital firms.

The LDP’s Web3 white paper has sparked over 160 active projects across Japan, focusing on preserving traditional cultural heritage and revitalizing rural communities. However, the fate of these initiatives remains uncertain amid the LDP’s internal challenges.

In response to the corruption scandal, Kishida has pledged to take disciplinary action against implicated party members before the lower house of parliament is dissolved. Despite these efforts, the scandal threatens to undermine Kishida’s leadership and potentially derail Japan’s Web3 ambitions.