NEW WAY TO PAY Govt’s digital cash would change how we spend and save By John Amari
On July 17, the Government of Japan announced that it will intensify efforts to launch a central bank digital currency (CBDC). It was the first time that CBDC—a digital form of central bank-issued currency—was mentioned in the country’s annual policy plan. Yet, well before the announcement, the Bank of Japan (BOJ) was already engaged in research into CBDCs. The BOJ is not alone. Central banks around the world have been similarly engaged, including those of the United Kingdom, the European Union, and China. The Bank of Canada and the United States’ Federal Reserve System are doing the same. In light of these developments—and to find out more about the state of CBDCs in Japan—The ACCJ Journal spoke with two thought-leaders in the industry: Hiromi Yamaoka and Ken Kawai. Yamaoka and Kawai agreed that, while CBDCs present many opportunities to transform the global financial industry, there remain important challenges to solve before they become the norm. And while both experts are optimistic that Japan will eventually launch CBDCs, they believe we are still in the early stages of development. STATE OF THE ART In Japan, research into digital currencies such as CBDCs has gained steam in recent years, with three main study groups having been launched. Yamaoka, who until 2019 was the director-general of the payments and settlements systems department at the BOJ, is chair of one such group.
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“We are thinking about what we can do—as a private sector initiative—to innovate the payments systems in Japan, including digital currencies,” he said. The study group comprises about 10 leading corporations from several industries, including information technology, retail, and finance. Telecommunications giants NTT Group and KDDI Corporation, retail giant Seven & i Holdings Co., Ltd., transportation giant East Japan Railway Company, and Japan’s three mega banks—Sumitomo Mitsui Banking Corporation Group, MUFG Bank, Ltd., and Mizuho Bank Ltd.—are members. Representatives from the BOJ, the Ministry of Finance, the Financial Services Agency, and the Ministry of Economy, Trade and Industry attend as advisors. And, beyond their immediate circle, the group is engaged in bilateral talks with various entities, including non-banks and IT companies, Yamaoka added. BEYOND BANKS The second study group on Japan’s settlement system is the Zengin System, which is also the interbank network for oper ating domestic funds transfers. Currently, the participants are limited to banks (depository institutions), most of which are members of the Japan Bankers’ Association. However, with the advent of new players in the global finance and payments industry, such as social media giant Facebook, Inc. and mobile app developer Line Corporation, that may change.
HIROMI YAMAOKA Former director-general, payments and settlements Bank of Japan
