Japan to Finalize Digital Yen Plans by 2022

IN BRIEF

• Japans CBDC development is ready to enter the second phase.

• By 2022 Japan would have more clarity on what the digital yen would look like.

Japan will have more clarity on its CBDC product digital Yen, by the end of next year. According to a lawmaker who is overseeing the ruling partys digital currency plan, the CBDC development may potentially be the beginning of a turf war between traditional lenders and online platform operators.

Bank of Japan will be moving towards the second phase of its Central Bank Digital Currency (CBDC) experiment by late 2022. The first phase encouraged and enabled the rapid growth of private innovation by partnering with counterparts. The upcoming phase expects to reveal developments on the functioning and intermediaries of digital Yen, like deciding the organization that may serve as a mediator between the BOJ and deposit holders.

Hideki Murai, the ruling Liberal Democratic Partys Head of digital currencies panel, told Reuters,

“By around the end of next year, we‘ll have a clearer view of what Japan’s CBDC would look like.”

BOJ resist changes

However, BOJ‘s against the motion stance is catching fire due to existing instability in Japan’s financial industry. With the online settlement offered by non-bank retailers and moving into commercial bank territory; BOJ is averse to any potential changes caused by the digital Yen.

Moreover, BOJ must ensure that the digital Yen is compatible with the CBDC of other nations and not just Japan, for a successful outcome. Nevertheless, the government assured that there will not be any immediate or sudden CBDC changes; but discussions continue regarding the effects on the financial sphere after issuing CBDC.

“If the BOJ were to issue CBDC, it would have a huge impact on financial institutions and Japan‘s settlement system…CBDC has the potential to completely reshape changes occurring in Japan’s financial industry. ”Murai said.