Yesterday, the Bank of Japan (BOJ) held its first meeting with the “Central Bank Digital Currency (CBDC) Forum”, a newly-established group of 60 firms that will convene to discuss the development of a potential digital yen. Seiichi Shimizu, director of monetary policy at the central bank, emphasized the BOJ’s global perspective and the need to leverage business expertise to help it prepare for a possible launch decision. The forum will establish two working groups to facilitate exchanges regarding future system design, with more to come later this year and next.
Digital yen’s current status
After two years of researching proofs of concept (POCs), the BOJ entered a pilot phase in April to test the technical feasibility of a digital yen, particularly with regard to the integration with banks, intermediary networks, and other stakeholders.
The central bank has not yet committed to issue a digital yen, a decision that could require a referendum.
CBDC Forum and working groups
The forum’s participant list comprises a diverse group of some 60 private entities* from across the CBDC ecosystem, including banks, technology firms, and blockchain providers. Some have already worked with the BOJ on previous digital yen experiments, but others are somewhat new to the game.
The aim of this first meeting was to update participants on the central bank’s CBDC initiatives and establish the first two working groups.
One will focus on the connection between the CBDC system and financial institutions’ infrastructure to deepen the BOJ’s understanding of the technical and operational considerations involved.
The other working group will dive into additional use cases beyond basic payments, such as programmability and the ability to deploy an embedded CBDC. It will also explore the technical aspects such as APIs, software development kits (SDKs) and a sandbox environment for testing.
International CBDC angle
One last note is the BOJ’s emphasis on overseas trends concerning CBDCs. The central bank appears to be closely following the developments in the US, UK, and China, but it seems particularly interested in the digital euro, although this could be related to the fact that the EU has been more prolific in sharing information.
Interestingly, the report only mentioned the CBDC efforts of other major economies but not any of the live CBDCs in the Bahamas, Jamaica, Nigeria, and the Eastern Caribbean. While Japan is an advanced economy and keen on digitalization, unlike other major economies cash usage is still very significant.
* The group includes Japan’s major banks and securities firms, JPX Research Institute (linked to Tokyo Stock Exchange), major card provider JCB, Sony and Softbank, and several blockchain firms, including BOOSTRY, CoinCheck, DataChain, Soramitsu, SBI R3, and Startale Labs.