Japan joins a growing list of countries exploring the possibility of adopting a digital currency, with the country’s central bank, the Bank of Japan (BoJ), announcing it’s would launch a pilot to test a “digital yen” in April.
The move comes more than two years after the BoJ took its first step into the space, launching a central bank digital currency (CBDC) proof-of-concept experiment, in October 2020.
The BoJ initiated the first phase of that PoC in April 2021 to test basic CBDC transactions, including issuance, payment, and transfer. A year later, Japan entered phase 2 of the PoC, which is expected to end this March, to perform additional CBCD functions related to its core performance.
The pilot program, which will be launched in April, aims to “test technical feasibility that is not fully covered by PoCs” and “use the skill and knowledge of private companies in terms of technology and operation to design an ecosystem of CBDC in the possible event of social implementation”, saying CEO of the Bank of Japan Uchida Shinichi during his speech.
“Under the pilot program, we plan to develop a system for experiments, where a core system, intermediary network systems, intermediary systems, and endpoint devices would be configured in an integrated manner,” Uchida said.
Transactions do not occur between retailers and consumers for now (only simulated transactions will occur during the pilot stage), according to the Central Bank. Japan will hold a CBDC forum and invite private companies involved in retail payments or related technologies to participate in the discussion, Uchida added.
Last November, the BoJ unveiled its experimental plans for the digital yen, which would work with three undisclosed local banks and other regional banks to experiment with the CBDC to see if it can operate in areas with limited internet access and during natural disasters. . by local news outlet Nikkei. The three megabanks in the country mentioned in the report are Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group.
As of December last year, 114 countries are actively considering implementing a CBDC, up from 35 countries in May 2020, according to a report from the Atlantic Council. The result comes in the back of the Asociation in October between the Bank for International Settlements (BIS) and four central banks (Hong Kong Monetary Authority, Bank of Thailand, People’s Bank of China and Central Bank of the United Arab Emirates) to test currency transactions across borders.
In addition to China, Hong Kong and Thailand, more than 20 countriesincluding Australia, India, Japan, South Korea, Singapore, Brazil, Malaysia, South Africa and Ghana, will continue or start the pilot stage in 2023.
Japan reportedly will decide on the issuance of its CBDC in 2026.
