Digital yen will take years, ex-Bank of Japan executive says

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A former executive at the Bank of Japan has said it would take the central bank a number of years to be ready to roll out a central bank digital currency, according to press reports.

Hiromi Yamaoka, the former head of payment and settlement systems at the central bank, said the Bank of Japan still has some distance to go before it can launch a digital currency, despite mounting international pressure to do so, in line with other major global central banks.

Yamaoka said the central bank was particularly concerned about the impact of a central bank digital currency (CBDC) on private bank deposits, fearing it could trigger significant outflows from the country’s banks.

Now the chair of a consortium of banks developing infrastructure for digital payments, Yamaoka told Reuters there is “no point issuing a CBDC if it isn’t used widely.”

“The fundamental question, and a very tricky one, is how to ensure private deposits and a CBDC co-exist. You don’t want money rushing out of private deposits. On the other hand, there’s no point issuing a CBDC if it isn’t used widely.”

One possible solution for the central bank would be to impose limits on the amount of any digital currency an individual would be able to hold. However, Yamaoka noted this could distort behavior in other ways which could still drive individuals and companies away from traditional payment and settlement structures.

The comments come after the Bank of Japan released a report indicating it was preparing to start trials of a digital yen in 2021. This puts Japan’s timeline to a CBDC behind a number of other major economies which already have developed plans in place for a digital currency.

In October, a Japanese finance minister said the government was not concerned about regional rivals China moving first on CBDCs, noting it was unlikely “a single digital currency will dominate the world.”

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

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