Japan has rejected an invitation from the European Union to join its flagship plan to use frozen Russian state assets to fund Ukraine, limiting Brussels’ efforts to build a broader international coalition around the measure.
EU officials asked Japan to take part in a proposed “reparations loan” scheme that would leverage immobilised Russian central bank reserves to provide long-term financing for Kyiv. Tokyo declined, citing legal constraints and continuing instead to work within the existing G7 framework, which focuses on using profits generated by frozen Russian assets rather than the assets themselves.
The decision comes at a sensitive moment for the EU. Brussels has proposed raising around €90 billion for Ukraine for 2026–27, largely via a loan backed by roughly €210 billion in frozen Russian sovereign assets held in the bloc. The European Commission argues that this would cover about two-thirds of Ukraine’s projected financing needs over that period and allow Kyiv to enter any future peace talks in a stronger financial position.
Under the EU concept, the assets themselves would remain formally owned by Russia but would be used as collateral for a long-term, zero-interest loan to Ukraine. The loan would be repaid in the future, in principle from Russian reparations. European officials say this approach is designed to stay within international law while signalling that Russia will bear financial responsibility for the damage caused by its full-scale invasion.
Japan’s calculus is shaped by both legal caution and its existing commitments within the G7. Tokyo already holds an estimated $50 billion in frozen Russian central bank reserves, making it one of the largest custodians of such assets outside Europe. It has joined other G7 members in backing a $50 billion loan to Ukraine secured against the interest income generated by frozen Russian reserves, and earlier this year agreed a separate loan of about $3 billion to Ukraine under that mechanism.
The G7 “extraordinary revenue acceleration” scheme, which focuses on windfall profits rather than the principal of the assets, is regarded in Tokyo as less likely to trigger protracted legal disputes or challenge established doctrines on sovereign immunity. Japanese policymakers have also expressed concern that moving beyond the G7 template could increase litigation risks for central banks and financial institutions holding Russian reserves in Asia and elsewhere. Those concerns appear to have weighed against joining an EU-designed structure in which the bulk of collateral would sit in European jurisdictions.
For the EU, Japan’s refusal narrows the political scope of its initiative. Brussels had hoped to demonstrate that the loan scheme could attract backing not only from EU member states and close European partners such as the UK, but also from other major custodians of Russian reserves. That would have strengthened the argument that using frozen assets to support Ukraine is an emerging standard response to large-scale breaches of international law, rather than a purely European innovation.
The setback also comes against the backdrop of internal EU divisions. Belgium, where about €185–194 billion in Russian central bank assets are parked at the Euroclear securities depository and local banks, has so far resisted the reparations loan plan. Brussels warns that the country could face disproportionate financial and legal exposure if Russia challenges the scheme in court, and has demanded stronger guarantees from its partners before giving consent.
Other capitals have voiced more targeted reservations. France supports the concept of a loan but is wary of drawing in private banks that hold part of the Russian reserves, citing contractual obligations and client confidentiality. Several member states are also concerned about possible retaliation from Moscow against European assets and investments abroad if the EU is seen to move too far towards de facto confiscation.
Despite these constraints, EU leaders have insisted they will continue to seek agreement on a common line before the end of the year. Heads of state and government are due to return to the issue at upcoming meetings, amid mounting pressure from Kyiv and from a group of member states that argue delay in mobilising Russian assets harms Ukraine’s ability to sustain its defence and basic state functions.
Japan’s stance leaves the EU with a more limited coalition than it had hoped for as it finalises the technical and legal design of the loan. While the G7 mechanism demonstrates that coordination among Western partners on the use of frozen Russian assets remains possible, the divergence between the EU’s reparations loan model and the profit-based G7 approach highlights the complexity of building a single, global template.
For Ukraine, the immediate impact is likely to be felt more in political signalling than in the near-term flow of funds. The main financial weight of the EU plan would still rest on assets held within the bloc, above all those located in Belgium. Japan’s decision does, however, illustrate the limits of European efforts to extend the model to other major holders of Russian reserves at a time when legal risks, central bank independence and long-term precedent all feature prominently in national debates.
As negotiations in Brussels continue, officials are balancing three objectives: securing sustainable support for Ukraine, maintaining cohesion within the EU and the wider G7, and avoiding steps that could unsettle global financial markets. Japan’s refusal to join the EU scheme suggests that, for now, many non-European partners prefer to confine cooperation to the narrower, profit-based arrangements already agreed at G7 level.
