- The Bank of Japan has announced that it plans to trial a CBDC next year
- A digital yen is not inevitable, but the banks wants to “prepare thoroughly” for a digital future
- Japan has been reluctant to step into the CBDC world, but China’s progress has forced their hand
The Bank of Japan has announced that it will begin trials of a Central Bank Digital Currency (CBDC) in 2021, becoming the latest central bank to jump aboard the stablecoin train. Reuters reported last week that the Bank of Japan would begin its own experimentation with CBDCs next year in line with the government’s focus on reform through digitalization and following fast-paced developments from China and the European Union in recent months.
First Tests in April 2021
The news came thanks to a Bank of Japan report published Friday that laid out the country’s approach on the subject of a digital yen. The bank stated that work was already underway in creating a wireframe for the CBDC, with the first phase of experiments on the fundamental infrastructure, such as issuance and distribution, anticipated around April 2021.
This first round of experiments will be part of the bank’s efforts to see how it can issue a general purpose stablecoin that can be used by the general population and businesses alike. Any such CBDC must complement cash rather than replace it and focus on increasing the convenience of payment and settlement systems, echoing a sentiment made by Christine Lagarde, the President of the European Central Bank, last week in reference to a digital euro.
China Progress Has Forced Bank of Japan Into Action
The Bank of Japan report was careful to state that it “currently has no plan to issue [a] CBDC” but that it must “prepare thoroughly to respond to changes in circumstance.” To this end it says that it has a thorough development and testing program in place, right up to a pilot program involving private firms and households.
Like many countries both in Asia and beyond, Japan has been cautious to not rush into the digital cash era, especially as Japanese citizens are a notably cash-loving bunch. However, China’s relentless march towards a digital yuan, which has got to the point of public testing, has forced the Bank of Japan’s hand, alongside many others.