Japan’s Ministry of Finance is planning to establish an expert panel to study the feasibility of launching a central bank digital currency (CBDC) or digital yen, according to a report from a local news publication. The panel is expected to discuss the creation of a framework for a digital currency, using the findings of more than two years of proof-of-concept experiments conducted by the Bank of Japan.
The pilot program for a digital yen, which will involve the BOJ and other financial stakeholders, is also set to launch at the same time. While BOJ officials have stated that they don’t have any immediate plans to issue a digital yen, the finance ministry is taking steps to prepare for the possible introduction of such a currency.
As Japan holds the presidency of the Group of Seven (G-7) industrialized nations this year, the country is also planning to steer tougher global crypto regulations. According to a report by Kyodo, Japan aims to lead discussions on the regulation of digital currencies at this year’s G-7 summit.
The move towards a digital yen comes as central banks worldwide are exploring the possibility of creating their own digital currencies. The benefits of a CBDC include greater financial inclusion, faster and cheaper transactions, and increased security and transparency. However, the move towards a digital currency could also have implications for traditional banking systems and financial stability.
In Japan, the introduction of a digital yen could have significant implications for the country’s economy, which is already highly cashless. According to a 2023 survey by the Statista, cash transactions accounted for just 51.1% of all transactions in the country. 36% will use cashless transactions wherever possible. The widespread adoption of a digital yen could further reduce the use of cash and potentially disrupt the country’s traditional banking system.
While Japan has been relatively open to cryptocurrencies in recent years, with the country officially recognizing bitcoin as a form of payment in 2017, the introduction of a digital yen could lead to increased regulatory scrutiny and potentially limit the use of other cryptocurrencies.
The potential introduction of a digital yen in Japan reflects the global trend towards exploring the benefits of CBDCs. While a digital yen could offer advantages such as increased efficiency and transparency, its introduction could also have significant implications for Japan’s traditional banking system and the wider crypto industry. As the expert panel explores the feasibility of a digital yen and the pilot program gets underway, it will be interesting to see how Japan’s economy evolves and how the country’s regulatory approach to digital currencies may change.