Japan Lawmakers Proposes Close Coordination with the US over Digital Currency

Politicians in Japan are appealing to the G7 members to collaborate and perform research on digital currency as a response to China’s schedule to launch the digital Yuan.

Some Japanese lawmakers believe China's Digital Currency Electronic Payment (DCEP) could spread widely among the emerging economies and threaten the dollar's dominance. This won’t bode well for Japan which relies heavily on dollar-based settlements.

On February 7, senior Liberal Democratic Party (LDP) members informed reporters that Japan should share information with the US and the other G7 members on digital currencies because the digital Yuan is a serious threat to the greenback’s global supremacy. Akira Amari, LDP leader, and the former economy minister said,

“We live in a stable world led by dollar settlement. How should we respond if such a foundation collapses and if [China’s move] gives rise to a struggle for currency supremacy? As this year's G-7 chair, the U.S. should include digital currency on the agenda for the next meeting of the group.”

Formal Proposal for More Cooperation to Be Officially Presented to the Government

The formal proposal that calls G7 members to cooperate on the digital currencies matter is going to be next week officially presented to the government. Just like numerous other countries, Japan relies on a US dollar-denominated system of settlement when it comes to business and transactions, which means the digital Yuan would indeed be a serious threat to the country’s economy.

Japan to Issue Its Own Digital Currency?

The lawmakers in LDP said at the end of January they will propose for Japan to issue its digital currency in a project between the private sector and the government. Also in January, the Bank of Japan (BoJ) started conducting joint research with 5 other central banks among which the EU and the UK’s were included, coordinated research into what digital currencies would involve.

The central banks' group’s first meeting is scheduled to take place in mid-April, at the International Monetary Fund (IMF) conference from Washington D.C. At the press conference from Friday, lawmakers talked about Japan issuing its digital currencies, but no announcements have been made about the initiative. Taking into consideration the legal and technical barriers involved, it’s unlikely this will happen too soon. But with both private, like Facebook-led Libra, and governments, Chinese DCEP, pushing for their own digital currency that decision may come faster than they would have liked.

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