On July 20, 2020, the Bank of Japan (BOJ) revealed that it is setting up a research group to explore central bank digital currencies (CBDC) in-depth, according to Reuters.
The group will take over from a previous working team that was looking into the possibility of developing a digital yen. This newly formed research group will continue research work undertaken by the BOJ in collaboration with the European Central Bank (ECB) in Project Stella.
In Feb. 2020, Japan’s central bank had also joined a group of five other central banks from Canada, Europe, England, Sweden, and Switzerland as well as the BIS to share CBDC research.
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The latest announcement would appear to simply reflect the recent Japanese Cabinet’s consideration on July 15 of a CBDC in its official economic plan.
The Cabinet’s consideration of a CBDC will be reportedly included in the Honebuto Plan for Economic and Fiscal Revitalization, which is the basis for Japan’s annual economic and fiscal policy.
Since China started working on its CBDC dubbed the digital Yuan, the Japanese government has fast-tracked provisions to build its own digital Yen.
In March. 2020, Kozo Yamamoto, a former official at the Ministry of Finance, urged Japan to work on a CBDC swiftly, stating:
“If Japan doesn’t issue a digital currency and people in the world use other digital currencies, the Japanese yen will be forgotten and lose its sovereignty.”
His comments followed an earlier interview with Reuters in Feb, where Yamamoto noted that Japan should create its own digital currency, hopefully, “within two to three years”.
Yamamoto added that it is “meaningless” if blockchain is not used for a CBDC because it can track when funds are stolen, with Know Your Customer (KYC) checks implemented for transactions above a certain amount.
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The bank then added that they are leaning toward a proof-of-concept (POC) based digital Yen, but they didn’t reveal a timetable for the rollout of such a digital currency.
These sentiments have been echoed by Deputy Governor of the BOJ, Masayoshi Amamiya. He explained that the digital Yen could potentially play a role in interoperability between Japan’s numerous payment providers.
Today’s news comes as Japan’s largest banking group MUFG revealed last week that it is set to release its digital currency and payments solution later this year.