A Japanese government official has revealed that the country will have a clearer idea of what a digital yen would look like for them by late 2022.
Reuters on Monday quoted Hideki Murai of the Liberal Democratic Party who heads the government’s Panel on Digital Currencies as saying that “by around the end of next year, we’ll have a clearer view of what Japan’s CBDC would look like”.
In keeping up with other central banks and the private sector exploring digital payment options, in March, the Bank of Japan announced that it had launched a special committee to look into the feasibility of a Central Bank Digital Currency. A proof of concept was scheduled to begin in April.
At that time the Liaison and Coordination Committee on Central Bank Digital Currency maintained that the central bank had no plans to issue a digital currency but was merely preparing to ‘respond to changes in circumstances’. The latest statement by Murai could be an indication that the bank intends to further pursue the venture.
Japan’s commercial banks are currently facing competition from non-bank retailers who offer an assortment of online settlement means. More details on the design of a CBDC could spark debate on how it could potentially affect financial institutions. On one hand, BOJ insists that a digital currency would not disrupt the operation of private businesses such as non-bank retailers. Murai however, notes that if the CBDC is designed in such a way that commercial banks become the main intermediaries, it could take business and data away from such businesses and back to the banks.
“If the BOJ were to issue CBDC, it would have a huge impact on financial institutions and Japan’s settlement system. CBDC has the potential to completely reshape changes occurring in Japan’s financial industry.”
The Bank of Japan is one of seven central banks jointly studying the main features of central bank-issued digital currencies. China, a leader in CBDC studies and implementation, continues to roll out pilot programs to test the potential effectiveness of the digital yuan in various aspects of the economy. The country expects to have some of its digital currency in circulation by the start of the Beijing Winter Olympics in February of 2022.
“If a digital yuan becomes so convenient it’s frequently used by tourists or becomes a main settlement means for trade, the relationship between the yen and yuan could change” and erode the yen’s status as a safe-haven currency, Murai said.