Bank of Japan headquarters in Nihonbashi, Chūō, Tokyo. Kaisuke Ota/Nikkei Asian Review
The Bank of Japan (BoJ) is planning to conduct a central bank digital currency (CBDC) tests early next year with the participation of three megabanks, local news outlet Nikkei reported on 23 November.
According to the publication, the pilot program is scheduled to begin in spring of 2023, and will provide a demonstration of how a digital yen could be issued in the country. The central bank of Japan will cooperate with several major private banks and organizations to identify and solve any problems related to customer deposits and withdrawals. One of the priorities of the BoJ is that the CBDC has offline functionality, enabling it to operate during natural disasters.
The central bank also revealed that it plans to proceed with its CBDC experimentations for about two years, and make a final decision on whether to issue a digital yuan to the public sometime in the 2026. Although Nikkei’s report did not name the banks that will participate in the experimentation, the “three megabanks” likely refers to the Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho financial groups.
The BoJ is the latest in a series of central banks that have launched some type of CBDC research and development initiatives. China, however, is the one leading the race for a digital currency, with the People’s Bank of China (PBoC) expanding its digital yuan trials to WeChat earlier this year, one of China’s most popular payment services.
Last month, the Reserve Bank of India launched a wholesale CBDC pilot with nine locally operated banks, and this Tuesday also revealed it is preparing to launch a retail pilot for the digital rupee in December, in collaboration with the State Bank of India. Starting January 2023, Australia’s central bank will also be conducting CBDC trials to identify and understand innovative business models, use cases, benefits, risks, and operational models for a CBDC in the country.