Tokyo, 27 February, /AJMEDIA/
Japan will start a pilot program in April to test the use of a digital yen, its central bank said, joining a growing number of countries seeking to catch up with front-runner China in launching a central bank digital currency (CBDC).
The widely expected move follows two years of experiments that the Bank of Japan (BOJ) has been conducting to decide whether to issue a CBDC, and moves Japan closer to issuing a digital yen in several more years.
It also comes ahead of the BOJ’s leadership transition to academic Kazuo Ueda, who is expected to succeed incumbent Haruhiko Kuroda. Kuroda’s second five-year term ends in April.
“Our hope is that the pilot program will lead to improved designs through discussion with private businesses,” BOJ Executive Director Shinichi Uchida said in opening remarks at the central bank’s meeting with private-sector executives.
Under the pilot program, the BOJ will conduct simulated transactions with private entities in a test environment, Uchida said. The program will help the BOJ be ready in case the government decides to issue a digital yen, the bank said.
Kazushige Kamiyama, head of the BOJ’s department overseeing development of a CBDC, said the pilot program will last for several years and involve discussions not just with commercial banks but non-bank settlement firms and carriers.
While there is no plan to do so for now, the central bank could conduct experiments involving actual transactions among retailers and consumers in the future, he said.
“To a certain extent, we need to move in lockstep with other advanced economies in deciding on the timeframe” for issuing a CBDC, Kamiyama told a briefing.
Central banks around the world have stepped up efforts to develop their own digital currencies to modernize financial systems and speed up domestic and international payments.
Japan and other advanced economies are seeking to catch up with China, which is at the fore of a global race to develop CBDCs and has ramped up pilot schemes for retail payments.
The U.S. Federal Reserve has also been exploring how it can launch a fully digital dollar that some have referred to as Fedcoin. Fed leaders have said that any launch of such an asset would need the support of elected leaders.
The Group of Seven (G7) advanced economies have sought to align themselves in their progress towards issuing CBDCs. In 2021, the group agreed that any digital currency issued by a central bank must “support and do no harm” to the bank’s ability to fulfil its mandate on monetary and financial stability.
© Thomson Reuters 2023
