Several articles are circulating that claim the Bank of Japan (BOJ) is abandoning its Central Bank Digital Currency project in the near future due to lack of interest from the public.
However, the source can be tracked back to a statement made in March by the governor of the BOJ and a news article published in the Asia Times.
Whether the Bank of Japan is truly abandoning its CBDC project remains to be seen. As of now, it seems like the BOJ never stated it was planning to implement a CBDC, but according to its own reports was merely “conducting experiments”.
Like most other central banks around the world, the Bank of Japan was caught off guard by how quickly bitcoin rose in popularity. As a result, many central banks began researching and experimenting with their own Central Bank Digital Currencies, spearheaded by China which already began rolling out its CBDC.
The Bank of Japan began experimenting with its own CBDC in April last year. But the central bank doesn’t have plans to implement a central bank issued digital yen in the near future.
The governor of the BOJ, Kuroda Haruhiko, stated in March:
“Finally, in the remaining time, I would like to touch upon central bank digital currency (CBDC). After the release of “The Bank of Japan’s Approach to Central Bank Digital Currency” in October 2020, the Bank of Japan carried out Proof of Concept (PoC) Phase 1 from April 2021 to conduct experiments on the basic functions that are core to CBDC as a payment instrument. Completing Phase 1 as planned, next month we will move on to PoC Phase 2 in order to test the additional functions of CBDC.”
Haruhiko then added:
“While there is no change in the Bank’s stance that it currently has no plan to issue CBDC, we consider it important to prepare thoroughly to respond to changes in circumstances in an appropriate manner […].”
The Bank of Japan was the first central bank to start quantitative easing in response to the Asian Financial Crisis of 1997. The bank engaged in 15 years of quantitative easing and began the aggressive inflationary policy long before the first quantitative easing program was deployed by the Federal Reserve in 2008.
The Bank of Japan, in this sense, can be seen as a pioneer in testing and deploying unprecedented monetary policy. The BOJ might not see an immediate need to implement a CBDC since the Japanese public already has access to low-cost digital banking services and cash is still widely used in Japan, especially by the older population.
However, if and once other countries deploy their CBDCs and gain nuanced control over monetary policy, it’s likely that the Bank of Japan will cave regardless of public support.
The Bank of Japan is already engaging in yield curve control, an advanced monetary policy tool that most other central banks aren’t using at the moment, at least not explicitly.
It remains to be seen whether and how the Bank of Japan will implement a CBDC in the future.