The Bank of Japan (BOJ) has announced that it will be trialing a central bank digital currency (CBDC) in April 2021 in response to China’s steady progress. This trial will consist of a three-phase approach:
Phase 1: Basic core CBDC functions such as issuance and distribution
Phase 1: Basic core CBDC functions such as issuance and distribution
Phase 2: Potential design of CBDC
Phase 3: The launch of a pilot program, involving private firms and households.
During this period, the BOJ will evaluate a digital currency framework, collaborate with private businesses, legal experts and related authorities to evaluate the impacts on prices and the financial system. In a bid to boost Japan’s competitiveness, Prime Minister Yoshihide Suga has emphasized his focus on digitalization and administrative reform.
The BOJ has predicted that the digital currency will be used widely by consumers and companies and that it would be desirable if the CBDC could be used internationally. Japan has treaded slowly into the digital currency space in fear of the social disruptions it could potentially cause for a country that is majority cash based.
