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Japan’s central bank, the Bank of Japan (BoJ), will launch a pilot to test a “digital yen” in April.
The BoJ launched a central bank digital currency (CBDC) proof of concept experiment in October 2020, more than two years ago.
In April 2021, the BoJ began testing CBDC issuance, payout, and transfer. A year later, Japan entered phase 2 of the PoC, which will end in March, to perform additional CBCD core performance functions.
In his speech, Bank of Japan executive director Uchida Shinichi said the April pilot program will “test the technical feasibility not fully covered by the PoCs” and “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 develop a system for experiments, where a central system, intermediary network systems, intermediary systems, and endpoint devices would be configured in an integrated manner,” Uchida said.
The Central Bank says retailers and consumers are not currently transacting (only simulated transactions will occur during the pilot stage). Uchida added that Japan will host a CBDC forum for private companies involved in retail payments or related technologies.
The BoJ announced its digital yen experiment plans in November, working with three undisclosed local banks and other regional banks to test the CBDC in areas with limited internet access and during natural disasters, according to local media outlet Nikkei. The report names three megabanks: Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group.
According to an Atlantic Council report, 114 countries were considering CBDCs in December 2018, up from 35 in May 2020. The Bank of International Settlements (BIS) and four central banks—the Hong Kong Monetary Authority, the Bank of Thailand, the People’s Bank of China, and the Central Bank of the United Arab Emirates—piloted cross-border foreign exchange transactions in October.
Australia, India, Japan, South Korea, Singapore, Brazil, Malaysia, South Africa, and Ghana will join China, Hong Kong, and Thailand in 2023.
Japan may issue its CBDC in 2026.
