Japan will soon start a pilot programme in April to test the use of a digital yen, its central bank said on Friday. Reuters
Tokyo: Japan will soon start a pilot programme in April to test the use of a digital yen, its central bank said on Friday. With the new move, Japan will join a growing number of countries seeking to catch up with frontrunner China which has already moved ahead in shaping a central bank digital currency (CBDC).
The announcement comes after 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.
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 programme 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 corporates.
As part of the pilot programme, the BOJ will conduct simulated transactions with private entities in a test environment, Uchida said. The programme will help the BOJ be prepared 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 programme 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.
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 forefront of a global race to develop CBDCs and has ramped up pilot schemes for retail payments.
Significantly, the United States Federal Reserve has also been exploring how it can launch a fully digital dollar that some have referred to as Fedcoin.
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. Japan is currently holding the chair for the G7 countries.
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