Hiromi Yamaoka, the former head of payment and settlement systems at the Bank of Japan, said the central bank still has some distance to go before it can launch a digital currency, despite mounting international pressure to do so, in line with other major global central banks. The former executive said the central bank was particularly concerned about the impact of a central bank digital currency (CBDC) on private bank deposits, fearing it could trigger significant outflows from the country’s banks.
“No point issuing a CBDC if it isn’t used widely.”
The chair of a consortium of banks is developing an infrastructure for digital payments. The former executive at BoJ, Yamaoka, told Reuters there is “no point issuing a CBDC if it isn’t used widely.” “The fundamental question, and a very tricky one, is how to ensure private deposits and a CBDC co-exist. You don’t want money rushing out of private deposits. On the other hand, there’s no point issuing a CBDC if it isn’t used widely,” he added.
Bank of Japan to start trials of a digital yen in 2021.
One possible solution for the Bank of Japan would be to impose limits on the amount of any digital currency an individual would be able to hold. However, Yamaoka noted this could distort behavior in other ways, which could still drive individuals and companies away from traditional payment and settlement structures. As reported earlier, the Bank of Japan released a report indicating it was preparing to start a digital yen trial in 2021. This puts Japan’s timeline to a CBDC behind many other major economies that already have developed plans in place for a digital currency. Central banks around the world are exploring CBDCs.