Ruling party lawmakers in Japan are set to propose new plans for a Japanese digital yen amid fears surrounding Facebook’s Libra and China’s upcoming central bank digital currency (CBDC).
The news comes despite claims from Bank of Japan governor Haruhiko Kuroda last year that there was no demand for a digital yen from the Japanese public.
As first reported by Reuters, the new digital yen would be a joint-led initiative between the Japanese government and select private companies.
Norihiro Nakayama, vice minister for foreign affairs, explained in an interview with Reuters:
“China is moving toward issuing a digital yuan, so we’d like to propose measures to counter such attempts.”
Nakayama, a member of the Liberal Democratic Party, said that exploring a CBDC was essential to keep Japan in tune with global changes in financial technology.
A formal proposal for the digital yen will arrive as early as next month, led by former economy minister Akira Amari.
It’s unclear why Japanese lawmakers feel the need to “counter” a Chinese yuan CBDC, although some have speculated that the first large economy to issue official digital fiat may be well positioned to become a digital reserve currency.
As such, Japan may be concerned that a digital yuan would undermine the sovereignty of its own national currency.
Japanese lawmakers have also expressed concern over Facebook’s Libra plans, previously citing “private money” issued by companies as another threat to monetary sovereignty.
‘No demand’ for yen CBDC
Bank of Japan governor Haruhiko Kuroda discussed CBDCs in December 2019, concluding that the Japanese public had no demand for a digital yen.
In a report published in November 2019, researchers at the Bank of Japan identified several legal issues that would have to be solved before a digital yen could be issued, which included seizure of criminal funds, how the bank would punish fraudsters, and money laundering concerns.
Nevertheless, Kuroda also shared that the Bank of Japan had been researching the technical and legal impacts of issuing a digital yen and how existing digital currencies could be tailored for widespread use.
International investment banking giant JP Morgan announced in December that it is looking to launch a blockchain-based payments network in Japan during 2020 called the Interbank Information Network.
The network will work with over 80 Japanese banks to streamline payment transactions and increase data sharing, which may replace the need for a Japanese CBDC.
You can read more about Japan’s digital currency news here.