As per a Reuters report on Thursday, Masayoshi Amamiya said at a Tokyo seminar that if advances in payments technology arrive quickly, there may be more demand for a central bank digital currency (CBDC). As such, it’s “very important” that the bank should lay the groundwork of the technology.
Japan needs to keep researching a central bank digital currency, even if it won’t launch one just yet, accord to the Bank of Japan’s (BoJ) deputy governor.
“The speed of technical innovation is very fast. Depending on how things unfold in the world of settlement systems, public demand for CBDCs could soar in Japan”, Amamiya said.
Amamiya said the central bank does not yet plan to issue a CBDC since potential issues need more research, such as the the ramifications for monetary policy and how to ensure security for a possible digital yen. Even so, the BoJ must be «prepared to respond.»
The comments come just days after politicians from Japan’s ruling Liberal Democratic Party said they would propose the BoJ issues a digital currency. About 70 lawmakers from the party are united in the belief that a digital yen is needed to counter the approaching launches of Libra and China’s digital currency.
Previously, Amamiya has played down on the idea that central banks could make negative interest rate policies more effective by issuing their own digital currencies.
If the BoJ issues a digital yen and set a negative interest rate, individuals and businesses would effectively be charged for holding the CBDC, he said last July. As a result, holders would drop the digital currency and instead hold cash, meaning central banks would need to eliminate cash. «No central bank would do this”, the official said.
In today’s report, Amamiya further said the issuance of a CBDC would likely not have a great effect on the BoJ’s control of interest rates, asset prices and bank lending, but monetary policy could become more complex if «the transmission mechanism» changes, he said.
Japan Doesn’t Need a Digital Yen, Asserts BOJ Official
Advanced economies such as Japan’s don’t need a digital currency, the deputy governor at the Bank of Japan (BoJ) asserted during a recent meeting.
Speaking at the Bank for International Settlement’s recent Future of Payments Forum, Deputy Governor Masayoshi Amamiya argued a Japanese central bank digital currency (CBDC) currently has little merit.
CBDCs could greatly benefit developing countries, such as Cambodia, that have «immature» payment infrastructures, he said in a speech publicized Friday. But for advanced economies, the costs outweigh the benefits.
«At this point, there is no need to implement new steps to ensure people’s access to central bank money,» according to a transcript of his speech. «Moreover, the currency systems and the payment and settlement systems of these economies are operating safely and stably. They cannot simply jump into new technologies, or actually, they should not.»
Assuming CBDCs would operate at lower running costs compared to private initiatives, Amamiya continued, merchants would likely prefer CBDCs over private payment systems, both legacy and cryptocurrencies, but he said this would «suppress private business and discourage innovations.»
If Japan introduced a digital yen, the central bank could also become the sole repository for the entire country’s transaction information, raising concerns about how the BoJ would store and protect personal financial data, Amamiya added.
Amamiya’s comments come after rising speculation that Japan was preparing to issue a digital yen. In February, senior politicians in the country’s ruling Liberal Democratic Party filed a formal proposal for the government to issue its own digital currency in the face of a rising monetary threat from the planned digital yuan from China.
Amamiya previously ruled out a digital yen in 2018 when he argued it could undermine the country’s two-tier financial system without providing additional benefits. In 2019, he said a move to a CBDC would only be viable if the whole country was prepared to abandon cash.
In his most recent comments, Amamiya argued there were benefits for countries already experiencing a significant decline in the use of cash to move over to a CBDC model. Sweden’s e-krona initiative, he said, was one example where people who have struggled to adapt to cashless payments could be provided with ready access to central bank money.
While he doesn’t favor a Japanese CBDC presently, Amamiya has advocated for more research into digital currencies. The BoJ was also one of six central banks to form a working group to share findings surrounding CBDCs earlier this year.
