Japan is seemingly following the footsteps of China to ensure that they are not left out in the race for government-backed cryptocurrencies. The country’s lawmakers will reportedly release drafted proposals tomorrow (Friday) for the creation of their own central bank digital currency (CBDC).

Countering China’s Digital Yaun

Japan initially became interested in issuing a digital currency after China announced plans to leverage the blockchain technology to launch a digital yuan last year. The country believes that China’s intention is a challenge for the existing reserve currency and international settlement system.

Japan sees China as a competitor. They fear that the digital yuan, if launched, coupled with China’s 1.4 billion population, could become the standard within the digital economy. China is already the world’s second-largest economy in terms of annual GDP.

Hence, Japan’s move to create its own cryptocurrency is a supposed measure to counter the potential influence of China’s upcoming digital currency.

According to Norihiro Nakayama, a senior lawmaker of Japan’s ruling party, the proposals tomorrow will help to pave the way for the use of digital currency in the country. However, this does not mean that Japan would be launching its cryptocurrency anytime soon due to legal and technical challenges.

Cooperating with the US

Nakayama is the Vice Minister for foreign affairs and one of the lawmakers who drafted the proposals. He said they would need to work with the United States (U.S.) if they must succeed in their plans.

“We sense the digital yuan is a challenge to the existing global reserve currency system and currency hegemony. Without the U.S., we cannot counter China’s efforts to challenge the existing reserve currency and international settlement system,” Nakayama explained.

The Bank of Japan (BoJ) would reportedly partner with six other central banks, including the Federal Reserve, to research digital currencies.

The impact of China’s digital yuan is not the only concern for Japan’s policymakers. The country is also among those worried about the controversial Facebook’s Libra. The social media giant has received several backlashes from central banks around the world since Facebook announced plans to launch its digital currency.

Nakayama, reiterating the opinions of Swedish Central Bank chief, said that Libra is catalytic and has propelled many central banks into considering launching their own digital currency.

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