Next month politicians plan to formally submit a proposal to Japan’s government to issue a Yen denominated digital currency, Reuters reported today.
“The first step would be to look into the idea of issuing a digital yen,” said Norihiro Nakayama, deputy minister of foreign affairs, who is part of a group of almost 70 Liberal Democratic Party lawmakers interested in the topic.
Talking to Reuters yesterday, he continued: “China is moving toward issuing digital yuan, so we’d like to propose measures to counter such attempts.”
China’s digital currency / electronic payment (DC/EP) initiative started the pilot phase at the end of last year.
However, Japan is very different from China, where cash is rapidly being replaced by private digital wallets from Alipay and Tencent’s WeChat Pay. In Japan, four out of five retail transactions still use cash.
In a survey from the BIS published yesterday, the BIS pointed to an array of motivations for central bank digital currencies (CBDC) with different advantages for both high and low cash usage countries.
While playing down the likelihood of an imminent digital currency launch, the Japanese initiative might be a joint government, private sector project.
On Friday, Prime Minister Shinzo Abe told parliament that the government would work with the BoJ, which is already studying digital currencies. The ultimate aim is to improve the yen as a means of payment and settlement.
The BoJ recently announced it was joining five other central banks and has been exploring CBDC for several years. Last year it published reports on retail CBDC options as well as legal issues. Additionally, Project Stella is a joint BoJ, ECB research initiative which released its first report in 2017.
There are several private Japanese digital cash projects, ranging from the SBI / Ripple Money Tap initiative, which has signed up several banks to enable 24/7 banking. Additionally, Mizuho has its J-Coin with at least 57 bank members. And MUFG has plans for an “MUFG Coin“, which it planned to launch as a white label solution for other corporates.