Japan could soon see the creation of a digital currency, aimed at promoting digitalisation in the country, thanks to an effort from a group of 30 major Japanese firms, Reuters reported on 19 November.
According to the publication, the newly formed group consists of Japan’s three largest banks, various brokerages, telecommunication firms, utilities and retailers. Chairing the group is a former Bank of Japan (BoJ) executive, Hiromi Yamaoka, who said that the firms will first focus on conducting experiments for issuing a digital currency, which would use a common settlement platform. Yamaoka said in a statement:
“Japan has many digital platforms, none of which are big enough to beat cash payments. We don’t want to create another silo-type platform. What we want to do is to create a framework that can make various platforms mutually compatible.”
What he was referring to was the three major banks, Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group, which have already created their own, individual digital payment systems, which are incompatible with one another. These platforms were unable to gain the trust of the Japanese people, who continue to use cash payments 80% of the time, which is considerably higher than China’s 30%.
During the group’s experimentation, the three banks will be responsible for issuing the digital currency, Yamaoka said, though the possibility of other institutions getting involved in the issuance process has not been ruled out. By creating a “common settlement infrastructure”, the firms are hoping to compete with existing payment services, like PayPal.
While the group of 30 firms is trying to create a common digital payments system, Japan itself has been increasingly more interested in researching Central Bank Digital Currencies (CBDC). At the start of 2020, around 70 lawmakers from Japan’s ruling party voiced their plans to propose the creation of a national digital currency.
Several months later, the Bank of Japan formed a new CBDC research team to counter the recent rise in interest from other central banks around the world. Following the creation of this team, the BoJ released a document outlining its approach to CBDCs, which revealed that the bank will begin its first testing phase of the digital yen sometime in 2021.
Even though the BoJ now has a specific plan around the development of a CBDC, it is still lagging behind China, which has already conducted several real world tests of its Digital Currency/Electronic Payment (DC/EP) system. The People’s Bank of China (PBoC) had gone as far as to claim that their digital yuan has already been used in 3 million transactions, with a total value of around $162 million.