Bank of Japan will start CBDC experiments this year

The Bank of Japan (BOJ) will start experimenting with its central bank digital currency (CBDC) later this year, says the central bank governor Haruhiko Kuroda

The Bank of Japan’s governor Haruhiko Kuroda said the apex bank needs to be adequately prepared for when it would need to issue its CBDC. He said this while addressing a seminar yesterday.

According to the Reuters report, Kuroda said that BOJ has to be ready to issue its digital currency. Hence, the reason why they would start experimenting with their CBDC before the end of the year. He said, “From the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems, it’s important to prepare thoroughly to respond to changes in circumstances in an appropriate manner”.

Kuroda revealed that the Bank of Japan has no immediate plans to issue a CBDC. However, central banks must not wait until the need arises before they start actively developing digital currencies. His statements are in line with what he said at a webinar in July last year.

BOJ has been talking about developing its CBDC over the past few months. In October, the central bank said it would begin experimenting on operating a digital yen in 2021. Private financial institutions are leading the way in terms of digital currency innovation and development. The BOJ admitted that central banks are lagging, and they will need to work with each other to catch up to the private institutions in the digital currency space.

BOJ will conduct the first phase of experiments on basic functions core to CBDC later this year. It would focus on the issuance and distribution of its digital currency. In January, BOJ deputy governor Masayoshi Amamiya said that the bank has to be ready to address public demand for CBDC in the country.

The Bank of Japan has been actively researching digital currencies since 2019. Several central banks globally are either actively researching or developing their CBDCs. China is ahead of most advanced countries in this area as it is already testing the Digital Yuan to see how it would perform in the real world.