Daily Management Review

Japan's Central Bank Starts First Phase Experiments On Developing Its Own Digital Currency


Japan's Central Bank Starts First Phase Experiments On Developing Its Own Digital Currency
The plans of the Bank of Japan to launch its own digital currency was kick started on Monday with the central bank starting to hold experiments to examine and understand whether it would be feasible to issue such crypto currencies.
With this move the Bank of Japan joins the ranks of other central banks who have been putting in efforts to match up with the innovations that have been achieved by other private players in the field of crypto currencies and the use of blockchain technology.
The Bank of Japan said in a statement that the first phase of the experiments that it plans to carry out will last until March 2022. The Japanese central bank said that the focus of these first phase experiments is to estimate the technical feasibility of issuing, distributing and redeeming a central bank digital currency (CBDC).
Following the successful completion of the first phase of experiments, the second phase of the tests will start which would conducted to test out more detailed functions which will include activities such as whether it would be feasible to set limits on the amount of CBDC that would be allow to be held by each entity, the bank said.
Shinichi Uchida, the Executive Director of the Bank of Japan had said last month in a meeting with a committee of policymakers and bank lobbies looking into CBDC that a pilot programme that will also include participation of payment service providers and end users would be launched by the bank if that was felt to be necessary.
“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,” Uchida had said back then.
Over the last few years, various central banks of the world have been contemplating development and launching of its own digital or crypto currencies in order to not only modernise their financial systems but also to ward off the threat from privately created crypto currencies while also speeding up domestic and international payment systems.
Even though the Chinese central back is currently ahead in this race, the Bank of Japan has also been accelerating its efforts  to play catch up with other central banks that have surged ahead as the Japanese central bank announcing its own plan in October last year in which it states its intentions to starts experiments to estimate how it can develop and operates a crypto currency of its own.