Key Takeaways
- BOJ to establish a CBDC Forum and invite private businesses engaged in retail payments to participate.
- BOJ states the pilot testing will help BOJ be ready in case the government decides to issue a digital yen.
Japan to launch a pilot program in April to test the use of its central bank digital currency/CBDC-digital yen, the Bank of Japan (BOJ) announced on Friday.
According to the official statement, BOJ will conduct simulated transactions with private financial firms in a test environment under the pilot program. The central bank further added that it would establish a CBDC Forum and invite private businesses involved in retail payments or in related technologies to participate in discussions.
Commenting on the development, BOJ Executive Director Shinichi Uchida states, “Our hope is that the pilot program will lead to improved designs through discussion with private businesses.”
BOJ stated that, at present, the pilot project is “not expected to see any actual transactions between retailers and consumers.” The bank also believes the pilot testing will help BOJ be ready in case the government decides to issue a digital yen.
In November 2022, local media reported that BOJ had planned experiments on a digital yen with 3 megabanks and regional banks in the country. As per earlier media reports, BoJ starting in spring 2023, will work with private banks and other organizations to identify any problems with deposits and withdrawals and check that a CBDC can operate during natural disasters and in areas without internet access.
The latest move by Japan also comes amid reports that its rival China is incentivizing its CBDC adoption with free digital yuan. China is further along than most countries in developing a CBDC. Earlier this year, the country included the digital yuan in cash circulation for the very first time. Last month, digital yuan, or e-CNY, issued by the Bank of China, was used to buy securities for the first time.
Apart from the Bank of China, several central banks have been ramping up their efforts to integrate CBDCs into their monetary system. The Atlantic Council report reveals that 105 countries are exploring a CBDC, representing around 95% of the global gross domestic product(GDP), up from 35 countries in May 2020. The Bahamas, Nigeria, Eastern Caribbean, and Jamaica are some countries that have already issued a CBDC.
