Bank of Japan Discusses Central Bank Digital Currency (CBDC)
Japan’s central bank and Finance Ministry recently held their first meeting to discuss the potential introduction of a central bank digital currency (CBDC). The meeting involved executives from relevant ministries, central bank directors, and officials from other government agencies. The Ministry proposed that a CBDC should work alongside private cashless businesses while prioritizing convenience and personal data protection in its design.
A CBDC is a digital currency issued and regulated by a country’s central bank. Unlike decentralized cryptocurrencies, CBDCs aim to provide a secure and reliable means of digital payment, offering advantages such as greater financial inclusion and lower transaction costs.
Exploration of a Digital Yen in Japan
Japan is currently exploring the possibility of introducing a digital yen, although no decision has been made yet. The Bank of Japan has been conducting experiments with a CBDC since April 2021 to assess its technical feasibility.
In 2020, the bank stated that it would consider issuing a CBDC if cash usage significantly declined. However, regardless of cash circulation, a CBDC may be issued to support private payment services if necessary to enhance overall systems.
A pilot program for the digital yen was initiated in April 2023, and discussions with companies like Sony, Toyota’s financial arm, and East Japan Railway for digital yen development began in July of the same year. Ultimately, the government and parliament will decide on issuing a CBDC after public discussion and potentially a referendum.
Global Trend: Over 100 Countries Exploring CBDCs
Many countries worldwide are also exploring or have already introduced their own central bank digital currencies. The Bahamas, Jamaica, and Nigeria have already rolled out their CBDCs, while more than 100 countries are currently in the exploration stage, according to the IMF.
China is at the forefront of CBDC-related initiatives. Former China central bank governor Dai Xianglong emphasized the country’s need to lead in CBDC adoption with its ongoing digital yuan pilot.
Hot Take: Bank of Japan Takes Steps Towards CBDC
Japan’s central bank and Finance Ministry have held their first meeting to discuss the potential introduction of a central bank digital currency (CBDC). This move aligns with the global trend of over 100 countries exploring CBDCs. While no decision has been made yet, Japan has been experimenting with a digital yen since April 2021. The government and parliament will ultimately decide on issuing a CBDC after public discussion and, possibly, a referendum. As CBDCs aim to offer secure and convenient digital payments, their introduction could bring various benefits such as greater financial inclusion and lower transaction costs. It remains to be seen how Japan will proceed with its exploration of a digital yen in the coming months.
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