Japan becomes more cashless, but central bank undecided on CBDC

The Bank of Japan (BOJ) says it is undecided on a central bank digital currency (CBDC) as cash usage in the country remains high. However, rapid digitization has substantially increased cashless payments in the country over the past few years, encouraging the central bank to continue to explore a possible digital yen.

Japan has long been known for favoring physical currency over digital payments. However, the volume of cashless payments has steadily increased in the country. Thanks in part to the global pandemic, which encouraged the broader adoption of non-physical payments, the volume of cashless payments in Japan increased by 36% from 2019 to 2022—according to Deutsche Bank data.

The Government also set a goal of increasing the ratio of cashless payment among consumers to around 40% by 2025. By 2024, this goal had already been achieved and exceeded, as the Ministry of Economy, Trade and Industry (METI) recorded cashless payment volume at 42.8%.

“Although banknote issuance remains high in Japan, usage of notes could fall significantly in the future amid rapid digitalisation,” said BOJ Executive Director Kazushige Kamiyama in a meeting earlier in June with private firms to discuss the Bank’s CBDC pilot program, as reported by Reuters on June 11.

This meeting with central bank officials came in the light of the BOJ publishing its latest progress report on the CBDC pilot program in May.

The 27-page report outlined various technical challenges for which the program was exploring solutions, including those related to scalability and performance.

The BOJ concluded the 27-page report by saying that “at present it has not been decided whether Japan will issue a CBDC, and this will be decided in future national debates.”

Editor’s note: This article has been updated.

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