The Bank of Japan looks to make another advance in the central banking race to launch a digital sovereign currency with testing planned for 2021.
Japan will conduct the first phase of experiments on the basic functions of its central bank digital currency (CBDC), according to a report from the Bank of Japan (BoJ), beginning in April 2021 when the nation’s fiscal year kicks off.
The first phase will include testing of CBDC issuance and distribution while the second phase will focus on CBDC designs such as issuance limits or remuneration on deposits.
Complement, Not Replace
If launched, the BoJ aims to make CBDCs complement cash rather than replace it, with a focus on improving the convenience of payment and settlement systems. In the last stage before the launch, a CBDC pilot program involving private firms and households will be launched.
BoJ’s ongoing efforts include the creation of a new team focused on issuing digital currency and joint research with other central banks.
Prepped to Respond
Despite plans to launch extensive testing, the BoJ noted in the report that it had no plans to issue CBDC and that it was «important to prepare thoroughly to respond to changes in circumstances».
«The (digital) renminbi is moving at a relatively fast pace - presumably they are aiming to take the first-mover advantage,» said Kenji Okamura, Japan’s vice-finance minister for international affairs, said separately at a seminar organized by think tanks last week. «First-mover advantage is something we should be afraid of.»
China’s central bank just announced the launch of public testing for the digital yuan in Shenzhen after claiming that its previous pilot programs had resulted in 3.13 million transactions totaling over 1.1 billion yuan ($162 million).
