BOJ to model digital yen tests on Sweden’s approach, not China’s

Bloomberg

The Bank of Japan (BOJ) will explore the design issues of a central bank digital currency (CBDC) in measured steps like Sweden rather than pressing ahead with large-scale pilot tests like China, according to the BOJ’s point-man on digital yen research.
“Sweden’s staged and planned expansion of experiments is a better fit for us than China’s big-scale tests from the get-go,” Kazushige Kamiyama, the head of the BOJ’s payment system department, said.
Kamiyama also said studies would continue in close cooperation with other major central banks including the Federal Reserve and European Central Bank in remarks that suggest the BOJ is looking to proceed with its research cautiously while ensuring compatibility with other potential CBDCs.
Earlier this year China took a further step towards a full-scale launch of its digital currency by introducing it to a wider range of users at the Beijing Winter Olympics. Sweden’s Riksbank, meanwhile, has focused on smaller-scale technical research including a test this year to see if an e-krona can fit into a settlement system with other digital payment providers.
Like the Riksbank, the BOJ has yet to decide if it will issue a CBDC. Japan’s central bank says the decision is up to the public.
Kamiyama said it’s natural for emerging economies to be more enthusiastic about launching electronic money compared with developed nations with well
established payment systems.
Still, with the pandemic accelerating cashless payments and strong interest in alternative assets for payment such as Bitcoin, an increasing number of central banks are looking into the need for electronic money.
Some 87 countries representing over 90% of the global economy are exploring the
possibilities of CBDCs.
, more than double the number in 2020, according to Atlantic Council, a Washington-based think tank.
BOJ Governor Haruhiko Kuroda said the decision on the feasibility of issuing a CBDC is likely to be made by 2026.
Referring to the potential time needed to develop a specific framework for a digital currency, Kamiyama indicated it would take about three years once the design has been decided. That’s a time frame that largely matches the view of some policy makers in Europe.
Japan’s central bank launched the second phase of its digital money experiments this month and Kamiyama signaled that proceeding to a pilot test, the next phase, is likely.
Kamiyama said the need for a ceiling on holdings and transactions will be throughly considered during experiments, echoing the position of European officials.
“Many private-sector businesses are calling for a limit to be set to avoid or at least contain any massive capital shift to a CBDC from bank notes or deposits,” Kamiyama said.