Japan’s central bank kicks off experiments on issuing digital currency

The Bank of Japan (BOJ) began experiments to study the feasibility of issuing its own digital currency. However, the BOJ currently has no plans to issue a CBDC.

„The Bank of Japan has been undertaking preparations to begin experiments on Central Bank Digital Currency (CBDC) in early fiscal year 2021, to test the technical feasibility of the core functions and features required for CBDC. As necessary preparations are now complete, Proof of Concept (PoC) Phase 1 begins today,” the BOJ said in a statement.

„In PoC Phase 1, the Bank plans to develop a test environment for the CBDC system and conduct experiments on the basic functions that are core to CBDC as a payment instrument such as issuance, distribution, and redemption. This phase will be carried out through March 2022, for a duration of one year,” the BOJ added.

The BOJ will thereafter move to the second phase of experiments that will scrutinise more detailed functions, such as whether to set limits on the amount of CBDC each entity can hold, according to Reuters.

If necessary, the central bank will launch a pilot programme that involves payment service providers and end users, BOJ Executive Director Shinichi Uchida said last month.

“While there is no change in the BOJ’s stance it currently has no plan to issue CBDC, we believe initiating experiments at this stage is a necessary step,” according to Uchida.

The bank is joining efforts by other central banks that are aiming to match the innovation in the field achieved by the private sector. In recent news, The Federal Reserve Bank of Boston and the Massachusetts Institute of Technology (MIT) announced plans to unveil two prototypes of a digital dollar as early as July 2021.