Japan is joining a growing list of countries exploring the possibility of adopting a digital currency, with the country’s central bank, the Bank of Japan (BoJ), announcing that it would launch a pilot to test a “digital yen” in April.
According to Tech Crunch, The move comes more than two years after the BoJ made its first step in the space, launching a central bank digital currency (CBDC) proof of concept experiment, in October 2020.
The BoJ kicked off the first phase of that PoC in April 2021 to test the basic transactions of CBDC, including issuance, payout and transfer. A year later, Japan entered phase 2 of the PoC, which is expected to end this March, to conduct additional functions of CBCD related to its core performance.
The pilot program, launching in April, aims to “test the technical feasibility not fully covered by the PoCs,” and “to utilize the skill and insights of private businesses in terms of technology and operation for designing a CBDC ecosystem in the possible event of social implementation,” said executive director of the Bank of Japan Uchida Shinichi during his speech.
“Under the pilot program, we plan to develop a system for experiments, where a central system, intermediary network systems, intermediary systems and endpoint devices would be configured in an integrated manner,” Uchida said.
Transactions do not occur between retailers and consumers for now (only simulated transactions will occur during the pilot stage), according to the Central Bank. Japan will have a CBDC forum and invite private businesses engaging in retail payments or related technologies to participate in the discussion, Uchida added.
Last November, the BoJ unveiled its experiment plans for the digital yen, which would work with three undisclosed local banks and other regional banks to experiment with the CBDC, and to see whether it can operate in areas with limited internet access and during natural disasters, per local media outlet Nikkei. The country’s three megabanks mentioned in the report are Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group.