A group of lawmakers from Japan’s ruling Liberal Democratic Party is reportedly working on a proposal to issue a national digital currency, according to a report published on January 24th.
It appears the proposal came into existence as a response to Facebook’s Libra and China’s drive to create a digital yuan.
“China is moving toward issuing digital yuan, so we’d like to propose measures to counter such attempts,” Norihiro Nakayama, a member of the party and parliamentary vice-minister for foreign affairs, stated in a press release on Friday.
According to Nakayama, the digital Yen could be a joint initiative between the government and private companies that would put Japan in tune with global changes in financial technology and would follow many similar initiatives across the world.
The lawmakers in charge of the proposal is a parliamentary group comprised of 70 Liberal Democratic Party lawmakers led by party heavyweight and former economy minister Akira Amari. The group plans to submit its proposal to the government as early as next month.
Although Japan is unlikely to issue digital currencies any time soon due to technical and legal hurdles, the news comes in the wake of a decision by the Bank of Japan to join five other major central banks – the Bank of England, the European Central Bank, the Bank of Canada, the Sveriges Riksbank (Sweden) and the Swiss National Bank – with the goal to share expertise and to explore digital currencies..
Notably, Japan’s Prime Minister Shinzo Abe has told the parliament today that the government will work with the Bank of Japan to study and research digital currencies as well as to find ways to increase to the yen’s convenience as a settlement means.
In the meantime, Facebook’s own Libra project has urged many central banks around the world to look at issuing digital currencies. According to the latest survey from the Bank for International Settlements, out of 66 major central banks, around 40% of them have progressed from conceptual research to experiments, or proofs-of-concept; and another 10% have developed pilot projects.
On the other hand, China’s own CBDC has elicited a varied responses with some Japanese lawmakers expressing concern over Beijing’s move to attempt to expand the yuan’s use as a settlement currency in emerging economies.
Japan’s Finance Minister Taro Aso stated earlier this month that it would be a “very serious problem” if the digital yuan becomes a widespread means for international settlement, as Japan settles transactions mostly in dollars.
Meanwhile, former Bank of Japan board member Takahide Kiuchi, said that China and Japan have different reasons to issue a digital currency. He believes that the primary motivation for a Japanese CBDC is to replace cash, whilst China’s main drive is to enhance the yuan’s clout in the global community.
“The BOJ probably won’t want to do anything that would stifle private-sector innovation. The best way could be to issue a hybrid-type digital currency that is operated and issued by private firms, with the central bank’s involvement,” he concluded.