Japan could be accelerating its plans for a digital yen project. As cryptocurrencies such as Bitcoin expand all over the world, governments and financial institutions are searching for different ways to compete against digital assets. The Japanese central bank is working on a Central Bank Digital Currency (CBDC) with a new testing phase that started back in April 2021.
Japan’s Central Bank Works on CBDC Project
We heard in recent years how several central banks were working on different CBDC initiatives. Central Bank Digital Currencies have been one of the most discussed topics among financial institutions and policymakers.
According to Takayuki Kobayashi, the first economic security minister of the country, Japan should speed up its project to create and issue a digital yen. One of the reasons behind this suggestion could be related to other countries accelerating their plans to release their own CBDCs.
Let’s not forget that countries such as China are already in advanced development stages of their own central bank digital currencies. This could be a threat to Japan if it’s not ready to release a CBDC alongside other countries. Indeed, China could release a CBDC as soon as next year if everything goes as expected.
Basically, Japan is looking at China’s geopolitical role and the implications that a digital CNY could have on the economy.
Andrew Sullivan, founder and writer of AsianMarketSense.com said about China’s ambitions to release a CBDC:
“Whichever country comes up with a good digital currency first, that’s likely to be copied. And so it’s rather like, you’re setting out the ground rules for how these are going to work, going forward.”
Let’s not forget that this is how things worked throughout the years. Basically, there could be different ways on how to release a CBDC. As Sullivan said, the first CBDC would likely be copied by other countries, which would already create a standard imposed by the creator of this virtual currency.
China has been a country that gathers as much data as possible from citizens. This is something that other countries such as Japan do not see as something positive. Furthermore, China is also fighting a currency war against the United States dollar in the region. The goal would be to take markets from USD and reduce its dominance in the region.
Finally, without launching a CBDC, Japan’s alliance with the United States could be in danger. The U.S. dollar losing its reserve-currency status could be harmful not only for the United States but also for Japan.