The Japanese government is considering convening a panel next month to investigate the benefits of a central bank digital currency (CBDC) or digital yen, as per NHK. Although the Bank of Japan claims there are no firm plans to issue a digital yen at this time, the Finance Ministry is finalizing plans for an expert group to be formed as early as April.
The panel is expected to discuss the creation of a framework for a digital currency based on the findings of the Bank of Japan's (BOJ) two-year proof-of-concept trials.The formation of the panel coincides with the launch of a digital yen pilot program involving the BOJ, financial institutions, and other private-sector partners.
As seen by BOJ officials, there are currently no plans to create a digital currency. It will most likely take some time to work out the necessary legal and framework issues. The ministry intends to take the panel's recommendations into account and plan for the eventual implementation of a digital yen.
CBDCs are the digital equivalents of fiat currency. CBDCs, like real currency, are issued by central banks and backed by the full confidence and credit of the government. CBDCs, however, are never issued, necessitating the development of new minting and trading mechanisms.
CBDC experiments have been conducted extensively in possible locations other than Japan. China is widely regarded as the forerunner in digital currency issuance, and it is also the nation most frequently cited in criticism that the motivation for establishing a CBDC is authoritarian in nature. During the Beijing Olympics in February of last year, an experimental digital yuan was introduced.
Central banks in Europe, the United States, and China are already investigating the viability of digital currencies. They can be used in place of banknotes and coins. The US Federal Reserve will also issue its first report on a digital dollar in 2022.