Japan Considers The Option of Digital Yen Amidst Rising Global Participation

Digital currencies have successfully managed to penetrate the global financial economy getting policymakers, regulators, and government institutions talking about them.

Asian economic giant Japan has joined other countries to issue it own digital currency, the Digital Yen. A report from Reuters states that the decision from Japanese lawmakers comes to counter the growing competition from Facebook’s Libra and China’s Digital Yuan.

Norihiro Nakayama, Japan’s parliamentary vice minister for foreign affairs said that the Digital Yen will help Japan to keep up with the global developments in financial technology.

Speaking on the developments made by Facebook’s Libra and China’s own state-owned digital currency, Nakayama said: “The first step would be to look into the idea of issuing a digital yen. China is moving toward issuing digital yuan, so we’d like to propose measures to counter such attempts”.

Reportedly a group of 70 Liberal Democratic Party lawmakers is working on this proposal of Digital Yen. Nakayama further stated that this will be a joint project between the government and private companies.

He added that this will be “the first step” in Japan aligning with the advances in financial technology. This latest development comes as the Bank of Japan joins the Bank of International Settlements (BIS) to assess different potential use cases of digital currencies.

The Bank of Japan will work with five other central banks to develop and test the central bank digital currencies (CBDCs) under their own financial jurisdictions. In its announcement, BIS said:

“The group will assess CBDC use cases; economic, functional and technical design choices, including cross-border interoperability; and the sharing of knowledge on emerging technologies. It will closely coordinate with the relevant institutions and forums – in particular, the Financial Stability Board and the Committee on Payments and Market Infrastructures (CPMI).”

Speaking on this matter, Former BOJ board member Takahide Kiuchi, said that both China and Japan have different reasons to consider the issuance of their digital currencies.

He said that China’s motivation for developing its CBDC is to enhance Yuan’s clout in the global community. Whereas for Japan it is more on changing the country’s cash-loving culture.

“The BOJ probably won’t want to do anything that would stifle private-sector innovation. The best way could be to issue a hybrid-type digital currency that is operated and issued by private firms, with the central bank’s involvement,” he said.