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The Bank of Japan (BOJ) has announced that it will begin a pilot for its digital yen with commercial financial institutions commencing in April, the trials are expected to last several years.
Bank of Japan starts digital yen pilot
Under the program, the BOJ will connect to participants’ systems to examine how transactions like deposits and transfers would work in practice using the digital currency.
Dozens of financial institutions including the nation’s top banks, regional lenders and digital payment service companies are expected to take part.
The pilot program will mark the final phase in Japan’s consideration of a digital yen, which proponents say will give a boost to the digital economy in a country where cash still accounts for a major share of payments.
“Our hope is that the pilot programme will lead to improved designs through discussion with private businesses,” BOJ Executive Director Shinichi Uchida said in opening remarks at the central bank’s meeting with private-sector executives.
The BOJ has been working since 2021 on a proof of concept for a digital yen, one of a number of central bank digital currencies being studied worldwide.
The BOJ will establish the Central Bank Digital Currency Forum, which will serve as a platform for discussions with private companies. The central bank does not yet expect actual stores or consumers to take part in the trials.
“We will have employees of the BOJ and private companies participating in the program to check how it feels to use [the digital yen] on apps and devices,” said Kazushige Kamiyama, head of BOJ’s Payment and Settlement Systems Department.
Work on central bank digital currencies is picking up steam in several countries. The US President has placed the research and development of a central bank digital currency as one of the top priorities for his administration.
The European Central Bank is expected to decide by the end of the year whether to develop a digital euro and the UK is in serious consideration of launching a digital pound.
“To a certain extent, we need to move in lockstep with other advanced economies in deciding on the timeframe” for issuing a CBDC, Kamiyama said.
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