Japan has become the latest major economy to begin exploring the feasibility of a central bank digital currency (CBDC). The Bank of Japan (BoJ) is reportedly conducting research on a digital yen as it aims to keep up pace with neighboring China. A local digital currency forum is also working on “some form of digital currency” for Japan’s private sector to complement the central bank’s efforts.
Japan has been closely monitoring China’s rapid progress in the CBDC efforts, according to the Japan Times. As CoinGeek reported, the People’s Bank of China has accelerated its efforts in recent months, with its latest pilot seeing 150,000 Suzhou residents participate.
Former BoJ executive Hiromi Yamaoka told the Japanese news outlet, “China has prompted moves toward digital currency around the world. It has done so at surprising speed, as central banks tend to take a cautious stance on new systems.”
The Bank of Japan revealed it will launch a CBDC feasibility study in April 2021. In its report, the bank stated, “The bank considers it important to prepare thoroughly to respond to changes in circumstances in an appropriate manner.”
One of the private sector initiatives that’s championing the move towards a digital yen is the Digital Currency Forum, which Yamaoka chairs. The forum has been exploring the feasibility of a private sector digital currency. It has partnered with Japan’s leading financial service providers including MUFG Bank, Mizuho Bank and Sumitomo Mitsui Banking Corp.
The forum is conducting research on how a CBDC would fit into the existing payments system without causing unnecessary conflict. One of the considerations is how it will affect the credit card sector, with most CBDC users likely to prefer a CBDC for payments as it will not charge any fees. Commercial banks could also lose their customers’ deposits as more people turn to using the CBDC directly.
The forum is also set to launch its feasibility study in 2021, alongside the central bank. Yamaoka revealed that the forum will be seeking to partner with the central bank to build some of the technical infrastructure required for the CBDC rollout.
He concluded, “Japan would lag behind other countries if we take a wait-and-see stance until the rollout of the BoJ’s CBDC.”
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