Bank of Japan (BoJ) Double Down on its Plans to Launch its CBDC

As the time stipulated for the launch of the digital yen gets closer, Haruhiko Kuroda the governor of the Bank of Japan (BoJ) has reiterated that the apex bank needs to be prepared.

According to Kuroda, BoJ must be equipped to roll out Central Bank Digital Currencies (CBDCs) that can function like other forms of money. The ability of the digital yen to function in this manner will remove any form of drudgery in using the CBDC as a safe and secured digital payment system.

During a financial technology seminar where he delivered a speech, the BoJ governor said

“Ensuring the coexistence of CBDC with various other forms of money … is something that we need to and will in fact achieve in the future,” also, “There are various options lying before us in terms of how and when to carry this out. But it’s our duty as a central bank to prepare ourselves to respond flexibly to any change in circumstances.”

BoJ Intense Research on CBDC

Talks about launching a CBDC in Japan have been ongoing for a while and at some point, it met with a stumbling block of whether the digital yen will be used to achieve negative interest rates.

The executive director of the Bank of Japan Shinichi Uchida explained that this was not going to be the case. Hiromi Yamaoka, a former head of the Bank of Japan’s financial settlement department supported the digitization of the region’s payment system but he showed no excitement about CBDC.

In no distant future, Japan Credit Bureau (JCB) had been contacted to commence the national digital currency project.

The project involved IDEMIA, a french company, and Soft Space, a Malaysian fintech. The scope of their research was “utilization of touch payment infrastructure provided by JCB”, “provision of cards for CBDC”, and “construction of a simulated CBDC handling environment.”

Afterward, a two years pilot testing phase was scheduled to start by April 2023 during which “the BOJ will work with private-sector banks to test deposits and withdrawals from accounts, and check whether the currency can work without internet access in an emergency.”

The focus of the pilot testing phase will check if the CBDC can offer benefits like minimal overall currency management, and reduced settlement risk, amongst others.