Bank of Japan Looks Forward to CBDC Pilot Testing Phase in 2023


The central bank of Japan popularly known as Bank of Japan (BoJ) is earnestly putting plans in place to commence the pilot testing phase of its Central Bank Digital Currency (CBDC) with several financial institutions by 2023. According to local media outlet Nikkei, the experiment would run successfully for two years involving Japan’s top three banks and other regional banks.

As per the published statement “During the two-year central bank digital currency (CBDC) pilot program, 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.” In the end, the result will be a key determinant as to if the Digital Yen will be rolled out as early as 2026.

Based on ranking, the top three financial institutions which will be involved in the testing are suspected to be Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc., and Mizuho Financial Group Inc. Prior to this, BoJ had already conducted a two-year experiment on the development and potential use cases of a digital Yen. 

BoJ CBDC Not to Achieve Negative Interest Rates

In April, the executive director of BoJ Shinichi Uchida made a speech where he clarified that once launched, the digital Yen will not be utilized to achieve negative interest rates.

Precisely speaking, Uchida said, “While the idea of using such a functionality as a means to achieve a negative interest rate is sometimes discussed in academia, the Bank will not introduce CBDC on this ground.”

It was after this speech that the second phase of the CBDC experiment started. Markedly, that phase has been scheduled to round up in April. 

Thereafter, the pilot testing phase of the digital Yen takes off. In addition to this pilot testing, BoJ is looking at involving fintech firms and IT experts who will come up with security measures like identity verification.

The central bank of Japan is yet to make a binding decision on whether it wants to launch a CBDC. It is considering several factors which need to be put in place to ensure smooth sailing of the digital currency. Some of those technicalities are public buy-in and regulations including the risk of cyber attack.

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