Japan's Finance Minister Katsunobu Kato said on Monday that cryptocurrencies can be part of a diversified portfolio.

"Crypto assets have risks surrounding high volatility, but through building an appropriate investment environment, they could be part of diversified investments," Kato said while speaking at an event in Tokyo, according to Bloomberg.

The minister added that the government has been trying to ensure that innovation isn't stifled by excessive regulation.

Kato's comments are particularly notable in the context of Japan's debt-to-GDP ratio exceeding 200%, which raises concerns about imminent financial repression and potential depreciation of the yen.

Financial repression involves policies aimed at reducing government debt burdens through measures such as inflation, low or negative real interest rates, currency depreciation and capital controls.

These policies tend to erode returns on traditional fixed-income and cash holdings, thereby boosting the appeal of alternative investments, such as cryptocurrencies, which offer real returns and diversification.

Read more: Bitcoin Chalks Out Lower Price High After Powell, Ether Prints Doji at Lifetime Peak

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