Central bank of Japan will begin testing digital money in April

The Bank of Japan (BoJ) has announced that it will begin a pilot to test a “digital yen” in April, making Japan the latest nation to consider adopting a digital currency.

Japan’s central bank to pilot digital currency starting in April

More than two years have passed since the BoJ’s initial foray into the area, when in October 2020 it launched a central bank digital currency (CBDC) proof of concept experiment.

In April of 2021, the BoJ initiated the initial stage of that PoC to investigate the core operations of CBDC, such as issuing, payout, and transfer. Japan entered phase 2 of the PoC a year later to execute additional CBCD core performance functions; this phase is scheduled to conclude in March.

Uchida Shinichi, executive director of the Bank of Japan, stated during a speech that the pilot program’s April launch aims to “test the technical feasibility not fully covered by the PoCs” and “to utilize the skill and insights of private businesses in terms of technology and operation for designing a CBDC ecosystem in the possible event of social implementation.”

Under the pilot program, “we plan to create a system for experiments where a central system, intermediary network systems, intermediary systems, and endpoint devices would be configured in an integrated fashion,” Uchida explained.

According to the Central Bank, at this time there are no actual transactions happening between merchants and customers. Uchida added that in Japan, there would be a CBDC forum where private companies involved in retail payments or related technologies could engage in discussions.

The Bank of Japan (BoJ) revealed its digital yen experiment plans in November, saying it would collaborate with three undisclosed local banks and other regional banks to test the CBDC and determine whether or not it can function in areas with limited internet connectivity and during natural disasters. Mizuho Financial Group, Sumitomo Mitsui Financial Group, and Mitsubishi UFJ Financial Group are the three megabanks of the nation mentioned in the report.

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According to a report by the Atlantic Council, the number of countries seriously contemplating implementing a CBDC increased to 114 in December from 35 in May 2020. The result follows a collaboration between the Bank of International Settlements (BIS) and four central banks in October to test out cross-border currency exchanges. These four banks are the Hong Kong Monetary Authority, the Bank of Thailand, the People’s Bank of China, and the Central Bank of the United Arab Emirates.

More than twenty countries, including Australia, India, Japan, South Korea, Singapore, Brazil, Malaysia, South Africa, and Ghana, will continue or enter the trial stage in 2023. These countries join China, Hong Kong, and Thailand.

Reports suggest that Japan will make a decision regarding the issuance of its CBDC in 2026.


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