Amidst 2022’s gruesome bear market, several governments doubled down on their central bank digital currency [CBDC] development. Now, Japan seems to be making headway in the same direction. It was recently revealed that the pilot program for the digital yen or the Japan CBDC is expected to go live in April.
It should be noted that the Bank of Japan [BOJ] has been working on this project for the last two years. This includes contemplation about the launch of the CBDC. The bank’s latest move of testing the CBDC could give the bank a better idea about its fully-fledged launch. Elaborating on the same, BOJ Executive Director Shinichi Uchida further said,
If a CBDC were to be issued in the future, exploring its framework in such a phased manner and engaging in highly transparent communication with the private sector are necessary steps to take for adoption in society.
Additionally, through this program, Uchida hopes to bring about “improved designs through discussion with private businesses.”
According to Uchida, the BOJ will replicate interactions with private financial institutions as part of the pilot program. But the bank has no plans to carry out transactions between stores and customers.
Here’s why Japan is rushing its CBDC project
The primary reason for Japan fast-tracking its CBDC process is to get on par with China. The Chinese government was one of the first countries to develop a CBDC. Furthermore, the e-CNY digital currency has already been put into use in the country. With China leading the global CBDC race, Japan seems to be trying to get into the action as well.
There is another factor involved. The pilot launch occurs before Haruhiko Kuroda, the current BOJ chief, passes the gavel to scholar Kazuo Ueda. April marks the end of Kuroda’s second five-year tenure. With several countries still assessing their decision on rolling out a CBDC, Japan could be getting ahead of the game.