Japan’s central bank, The Bank of Japan, has begun researching on making its own Central bank digital currency (CBDC), Reuters reported. The experiments will focus on the issuance, distribution, and launch of the digital yen.
Phase 1 of Japan’s Digital Currency Tests Begins
The Bank of Japan announced that it has begun Phase 1 of its central bank digital currency (CBDC) experiments that will continue until March of next year.
The second phase of the experiments will include a more detailed version such as setting limits on the size of individual holdings of the digital-analog of the yen for users.
If necessary, the central bank will launch a pilot program that involves payment service providers and end-users, BOJ Executive Director Shinichi Uchida said last month.
He also said that the bank currently does not plan to issue its CBDC at this time. However, the central bank finds it necessary to start experimenting in this area, saying:
“While there is no change in the BOJ’s stance it currently has no plan to issue CBDC, we believe initiating experiments at this stage is a necessary step.”
China Leading the CBDC Race
The Bank of Japan originally announced its plans to launch CBDC testing in October 2021.
While the central bank did emphasize that it has no plan to issue CBDC from the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems, it is still important to prepare for “changes in circumstances in an appropriate manner.”
By the end of last year, a local media outlet reported that the Bank of Japan is preparing to launch its own digital currency (CBDC) by 2023. Apparently, the Japanese central bank was following in the steps of China, which is already trialing its DCEP digital currency.
Currently, China is leading in launching digital yuan after research and development of over six years.