Get Ready for the Digital Yen: The Bank of Japan's Plans for a CBDC
Since then until now, cash has remained a secure and highly liquid method for paying for goods and services. Money serves as a unit of account, a medium of exchange, and a store of value when used as legal tender. For this reason, the Bank of Japan (BoJ) has previously declared that it does not believe Japan has a real need to issue a CBDC, a dim prospect that has some Japanese people impatient.
However, BoJ, like many other central banks, has been continuously testing the technical viability of the essential elements and functionalities of a retail CBDC ecosystem since 2021 through Central Bank Digital Currency (CBDC) trials.
The continuous tests aim to stay up with emerging technical aspects incorporating blockchain technology. And until now, the Bank of Japan (BoJ) is still testing a prospective digital Yen despite Japan's uncertainties on whether to issue a Central Bank Digital Currency (CBDC).
Finally, The local news outlet Nikkei reported on Nov. 23 that the Japanese central bank has begun working with three megabanks and smaller banks to execute a CBDC issuance trial.
How Japan Is Leading the Way With Their National Digital Currency
It is such a brave initiative on the part of BoJ to be collaborating with the top three banks in the nation and regional financial institutions to launch trial transactions of a digital Yen this spring, even though the CBDC idea has not received much support due to the prevalence of internet banking services, credit card usage, and e-money payment tools.
The BoJ is anticipated to work with significant private banks and other organizations as part of the trial to identify and address any problems relating to consumer deposits and withdrawals from bank accounts. According to the report, the trial would test Japan's potential CBDC's offline capability, focusing on payments made without the use of the internet. Beginning in the spring of 2023, the pilot program will offer demo tests for issuing the digital Yen, Japan's national digital currency.
Author's Note
While it is true that the main objective of introducing CBDC in Japan is to accelerate the transition to a cashless society, it is nevertheless understandable that the CBDC may not be acceptable to the general public given that private sector-based payment mechanisms offer real benefits.
However, as someone who understands the potential of a cashless society, I look forward to seeing the day when BoJ will finally decide to issue its own digital currency and its citizens will understand that CBDC might be a possibility to achieve a seamless and secure infrastructure in Japan.
What do you folks think about the projects BoJ is pursuing? Please let me know your opinions and, more importantly, what you enjoy and dislike about this blog. All comments are welcomed.