The race to introduce a Central Bank Digital Currency (CBDC) is ongoing, with countries trying to catch up to China. It appears that Japan is at the forefront of this race, as they have already come up with tests for every region. 30 companies have been tapped by the Japanese government for partnering up on the upcoming digital yen. According to a report by Reuters, the companies that have been chosen belong to some of the top economic sectors in Japan. There are utility companies, brokerage firms, banks, telecommunications service providers, and more. The focus of the economic strategy of the country is now on the digital yen.
Japan is notorious for its slow adoption of cashless payments, as cash makes up for almost 80% of the transactions that are conducted in the country. However, now that the government is moving forward with its plans for the digital yen, the government is exercising caution to ensure they can implement it successfully. A former Bank of Japan executive, Hiromi Yamaoka will be leading the group of companies in the test. He explained that the currency for the tests would be issued by the private banks that are part of the group. He also added that they hadn’t ruled out other companies or entities being part of the issuance process.
In fact, Yamaoka also highlighted that some of the leading banks in the country already had digital payment systems, which include Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group. Talking about the nature of the experiment, he said that they didn’t want a digital payments ecosystem that would be fragmented. He said that there were a number of digital platforms in the country, but none of them had the capability to beat cash payments. Therefore, they wanted to come up with a framework that would make the different platforms compatible.
The policymaker also said that the Bank of Japan was taking into account the possibility of huge capital outflows from local banks, after the launch of the CBDC. He pointed out that they were trying to come up with a system where private deposits and CBDCs can co-exist. He said that they would need the input of public and private sectors to tackle this problem and also ensure that the digital yen remains interoperable with various platforms and convenient to use. When it comes to its CBDC development, it seems that Japan is just taking a page out of China’s playbook.
China initiated its tests for the digital yuan in April and a number of large firms have been involved in this endeavor. Companies including China Telecom, the Industrial and Commercial Bank of China, the China Construction Bank and the Agricultural Bank of China have participated in these trials. Some of the large companies that have also gotten a piece of the testing include the biggest ride-hailing service in the country, Didi Chuxing, and ByteDance, the tech conglomerate. They are also planning to get the input of the country’s two largest payment processors, Alipay and WeChat.