Japan eyes central bank digital currency experiments in 2021

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The Bank of Japan (BOJ) is set to begin experimenting with its central bank digital currency later this year. BOJ said in the past that it doesn’t intend to issue a digital yen, claiming that Japan’s digital payments are sufficient currently.

Speaking in a recent news conference in Tokyo, BOJ Governor Haruhiko Kuroda stressed the need for Japan to prepare thoroughly for a time in which it may need to issue a digital yen. He revealed the state-backed digital currency later this year will allow the BOJ to stay in line with other central banks that have stepped up their CBDC efforts.

“From the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems, it’s important to prepare thoroughly to respond to changes in circumstances in an appropriate manner,” he stated, as reported by Reuters.

The governor, however, clarified that the BOJ will not be issuing a CBDC any time soon. The experiment will simply allow the bank to be better prepared if the need for a digital yen ever arises.

In December, Japan Times reported that BOJ was set to launch a CBDC feasibility study this year. As CoinGeek reported, the bank is striving to keep pace with its neighbor China, which has been the global leader among major economies in the CBDC race. The People’s Bank of China (PBoC) has been conducting airdrops in major cities including Shanghai, Suzhou and Shenzhen where citizens get to try out the digital yuan in retail payments.

In its latest move, the PBoC joined forces with the UAE, Hong Kong and Thailand in a CBDC research project. The project focuses on the use of a CBDC to ease costs and inefficiencies in cross-border funds transfers.

Despite all the CBDC moves the BOJ is making this year, a digital yen is still years away, a former BOJ executive has previously warned. Hiromi Yamaoka, the former head of payment systems at the bank, claimed that the bank is still a long way off from allowing CBDC to retail users.

He told Reuters last year, “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.”

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.

See also: CoinGeek Live panel, The Future of Banking, Financial Products & Blockchain