The Bank of Japan (BoJ) has become the latest monetary regulator to officially draft a plan for a central bank digital currency (CBDC), as it will start testing ‘as early as possible’ at the beginning of FY 2021, which starts in April.
The report, called The Bank of Japan’s Approach to Central Bank Digital Currency, was released on Friday, giving a comprehensive picture of the central bank’s stance on launching a digital yen.
“From the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems, the bank considers it important to prepare thoroughly to respond to changes in circumstances in an appropriate manner,” the BoJ stated in the report.
CBDC Will Complement Cash Economy
The regulator is focusing on making the CBDC more general-purpose with potential users ranging from companies to households. According to it, such a digital currency will complement the existing monetary economy rather than putting a dent into it.
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“…if cash in circulation drops sharply in the future, it might be necessary to make up for the decrease by issuing a CBDC,” the report added. “Regardless of the situation, it might be determined appropriate to issue a CBDC to improve Japan’s payment and settlement systems.”
However, the monetary regulator stressed that it currently has no plans to publicly issue a CBDC.
“While the BOJ currently has no plan to issue CBDC…it’s important to prepare thoroughly to respond to changes in circumstances,” the report noted.
The BoJ is joining an array of other central banks to officially launch the testing of CBDCs. Central banks of South Korea, France, and Sweden are only a few among several to test the digital fiat. However, they are still far behind the People’s Bank of China (PBoC) as it finished the development and is now mass testing digital yuan.
Furthermore, the BoJ is leading a consortium of top central banks in studying the feasibility of launching a CBDC that recently released a report highlighting the benefits of digital currencies in the implementation of monetary policies.