According to a Bank of Japan’s (BoJ) deputy governor, the country needs to keep on doing research on what issuing a central bank digital currency (CBDC) would mean, even if a launch is not yet in the cards.
As reported by Reuters on January 30, Masayoshi Amamiya said at a seminar held in Tokyo that if the payments technology continues to advance so fast, the demand for a CBDC may increase, so the bank needs to know everything about the groundwork of owning a digital currency. Here are Amamiya’s exact words:
“The speed of technical innovation is very fast. Depending on how things unfold in the world of settlement systems, public demand for CBDCs could soar in Japan.”
BoJ Is Not Yet Planning to Issue a CBDC
The governor continued his speech by saying BoJ doesn’t have any plans to issue a CBDC just yet, as potential problems still need to be researched, the monetary ramifications and security for the digital yen being mentioned among such problems. Even so, BoJ must be prepared, he added. Amamiya’s comments arrived a few days after members of the ruling Liberal Democratic Party in Japan said they would make the proposition for the BoJ to issue a digital currency.
70 Japanese Lawmakers in Liberal Democratic Party Say the Digital Yen Is a Must
There are about 70 lawmakers in the Liberal Democratic Party who think that issuing a digital yen is a must, especially when it comes to competing with Facebook’s Libra and China’s own CBDC, which are both scheduled to launch this year.
In the past, Amamiya has addressed the idea that central banks, by issuing their own digital currencies, would bring more effectiveness to the negative interest rate policies. He said in July that if the digital yen is issued by BoJ and the interest rate set is to be negative, businesses and individuals would be charged if they’d hold the CBDC, which would lead to them to drop the digital currency and to hold cash instead, moment in which banks would have to make an effort to get rid of cash.
As for the time being, Amamiya thinks that BoJ issuing a CBDC would not influence the bank’s control over asset prices, bank lending, and interest rates, yet the monetary policy may turn out to be very complex as a result of “the transmission mechanism” changing.