Japan’s Central Bank to Pilot Digital Currency Starting in April – Japan is among the increasing number of countries investigating the feasibility of implementing a digital currency. The Bank of Japan (BoJ), the country’s central bank, recently declared that it will conduct a trial to test a “digital yen” in April. This step comes after more than two years since the BoJ initiated a proof of concept experiment for a central bank digital currency (CBDC) in October 2020.
In April 2021, the BoJ began the initial stage of the proof of concept experiment to evaluate the fundamental operations of CBDC such as distribution, payment, and transfer. One year later, Japan progressed to phase 2 of the experiment, which is scheduled to conclude in March. This phase is focused on examining additional CBDC features related to its primary functions.
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The pilot program, launching in April, aims to “test the technical feasibility not fully covered by the PoCs,” and “to utilize the skill and insights of private businesses in terms of technology and operation for designing a CBDC ecosystem in the possible event of social implementation,” said executive director of the Bank of Japan Uchida Shinichi during his speech.
“Under the pilot program, we plan to develop a system for experiments, where a central system, intermediary network systems, intermediary systems and endpoint devices would be configured in an integrated manner,” Uchida said. As stated by the Central Bank, during the pilot phase, transactions between retailers and consumers will not take place, and only simulated transactions will be carried out.
The Bank also announced that Japan will organize a CBDC forum, and private businesses involved in retail payments or associated technologies will be invited to join the dialogue. Uchida further emphasized this point. According to a report by local media outlet Nikkei, in November of last year, the BoJ revealed its plans for experimenting with the digital yen.
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The Bank intends to collaborate with three local banks whose identities have not been disclosed, as well as other regional banks, to test the CBDC and determine its operability in regions with restricted internet connectivity and during natural calamities. The report mentioned Japan’s three megabanks, namely Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group.