According to a Reuters report released on January 24Th, about 70 legislators from Japan's ruling party are reportedly working on a proposal to issue a national digital currency. This is an effort to counter China's digital currency plans and Facebook's Libra.
Giving up on cash?
In June 2019, Masayoshi Amamiya, the vice-governor of the Bank of Japan, said central bank digital currencies - often abbreviated to CBDCs - could 'erode the credit channels of commercial banks and have a negative impact on the economy'.
Amamiya said the issuance of a digital yen would mean the abandonment of cash :
'The elimination of cash would make the settlement infrastructure impractical for the public, so no central bank would do it'.
The Bank's Vice Governor argued that if the Bank of Japan issues a digital yen and sets a negative interest rate, individuals and businesses would effectively be charged for the CBDC's holding, resulting in holders abandoning the digital coin and holding cash instead.
Masayoshi Amamiya explained :
'To overcome the lower bound of the nominal zero, central banks would have to eliminate cash. Eliminating cash would make the settlement infrastructure impractical for the public, so no central bank would do so'.
A cardinal change for the country
The deputy foreign minister of the parliament, Norihiro Nakayama, announced to the news agency that the digital yen project would be developed jointly by the government and private companies, and would follow many similar initiatives around the world. Nakayama said:
'The first step would be to explore the idea of issuing a digital yen. China is moving towards issuing digital yuan, so we would like to propose measures to counter such attempts'.
The ruling party group led by former Minister of Economy, Commerce and Industry Akira Amari plans to submit the proposal to the government in February. Amari had announced that a digital version of the Japanese currency would offer advantages, especially now that China has a similar plan.
The decision represents a cardinal change for the country, whose central bank officials saw 'no demand' for a digital currency from the central bank until December 2019.
Kozo Yamamoto, the minister in charge of reviving the local economy and head of his party's research commission on financing and banking systems, agreed with Amari's idea, saying that the government should include this type of digital currency in its half-yearly strategic guidelines, even though he himself mentions a delay of two to three years before the arrival of a real digital yen.
For Takahide Kiuchi, a former BoJ board member, by developing a digital yen, the central bank would seek to avoid restricting private sector innovation. Kiuchi said:
'The best way to do this could be to issue a hybrid type of digital currency that would be managed and issued by private companies, with the participation of the central bank'.
According to Reuters, Prime Minister Shinzo Abe told parliament that the government will work with the BoJ to examine digital currencies and ways to improve the yen as a means of settlement.
Written by: Laetitia Project Manager
Cartam : Free marketplace for cryptocurrency users