On Friday, the Japanese central bank revealed that it would launch a pilot program in April to test the use of its version of the central bank digital currency (CBDC) known as the digital Yen.
Shinichi Uchida, the executive director of the Bank of Japan (BoJ), during the fifth meeting of the BoJ Liaison and Coordination Committee on Central Bank Digital Currency, said they plan to develop a system for experiments.
Further, Uchida elaborated on the aim of the scheduled pilot program. The pilot is divided into two phases prioritizing technical feasibility and the utilization of skills and insights of businesses for designing the CBDC. He said:
The aim of the pilot program is twofold: first, to test the technical feasibility…and second, to utilize the skills and insights of private businesses in terms of technology and operation for designing a CBDC ecosystem in the possible event of social implementation.
Japan’s CBDC journey has been going on for a while now. The recent move comes approximately after more than two years of proof-of-concept experiments by the central bank around the digital Yen. Notably, the time frame is also important as the central bank is up for leadership change, with Kazuo Ueda expected to take over the top job from Haruhiko Kuroda, whose second five-year term ends in April.
In November last year, Todayq News reported that The BoJ would begin working with commercial banks and other organizations in the spring of 2023 to identify any issues with deposits and withdrawals and verify that a CBDC can function during natural catastrophes and in places without an internet connection.
Japan’s “three megabanks” are typically Mizuho Financial Group Inc., Sumitomo Mitsui Financial Group Inc., and Mitsubishi UFJ Financial Group Inc., even though the study omitted their names. According to the report, the experiment would run for two years, and the central bank will determine whether to issue a CBDC in 2026.
While adding that it will establish a CBDC Forum and invite private businesses engaged in retail payments or in related technologies to participate, the bank said that:
At present, the pilot is not expected to see any actual transactions between retailers and consumers.
The adoption and promotion of CBDC have been rapidly spreading in countries across the globe. Recently, China announced huge giveaways for the digital Yuan to upscale its CBDC adoption. Sources reveal that China’s digital Yuan continues to lead the CBDC race globally, extending to more than 105 countries, representing over 95% of global GDP.