Japan Joins the CBDC Race, Will Conduct Tests in April
Japan’s central bank said it would roll out a pilot program to run experiments on the use of a Digital Yen, according to a Friday announcement. The decision makes the Bank of Japan the latest global central bank to start working on a central bank digital currency (CBDC), joining the likes of China, France, and India, among others.
Digital Yuan Program Will Take Several Years
Bank of Japan (BOJ) will launch a pilot program to test the use of a digital yen, the central bank announced on Friday. The move comes after two years of tests the BOJ was running to decide whether to issue a digital yen, joining an ever-growing number of countries developing central bank digital currencies (CBDCs).
The BOJ will use the pilot program to carry out simulated transactions with private entities, said executive director Shinichi Uchida. The program aims to help BOJ prepare to launch a digital yen if the government decides so.
“Our hope is that the pilot program will lead to improved designs through discussion with private businesses.”– said BOJ Executive Director Shinichi Uchida
Kazushige Kamiyama, head of the BOJ department monitoring the development of a CBDC, noted the pilot program would take several years and involve negotiations with commercial banks and non-bank settlement institutions and carriers. In addition, the BOJ could run experiments through actual transactions among retail firms and consumers, though there are no definite plans for that yet.
“To a certain extent, we need to move in lockstep with other advanced economies in deciding on the timeframe.”– said BOJ executive Kazushige Kamiyama.
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BOJ Approaching Critical Leadership Change
With the launch of a pilot program, Japan becomes the latest global economy to join the CBDC race as central banks worldwide develop their digital currencies to upgrade financial systems and facilitate domestic and international payments. Other countries recently launched CBDC programs include Brazil and India, though Indians’ interest in the project seems very poor.
China is one of the frontrunners in this race, with its digital yuan app being used by millions of users. China’s central bank expanded digital yuan trials last year to some of its most populous provinces.
Meanwhile, the rollout of the digital yen pilot program comes amid a critical period for the BOJ as governor Haruhiko Kuroda nears the end of his second five-year term. Kuroda, the man behind Japan’s ultra-dovish monetary policy, is expected to be replaced by academic Kazuo Ueda.
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