Japanese Lawmakers to Propose Digital Yen in Response to China’s Digital Yuan

A group of Japanese lawmakers from the country’s ruling Liberal Democratic Party is planning on a proposal for Japan to issue a national digital currency, otherwise known as the digital yen. The need to develop a digital yen would seek to counter China’s digital yuan; meanwhile, more central banks across the globe are either studying or looking to launch their central bank digital currency (CBDC).

Japan’s Digital Yen to Counter China’s Digital Yuan

According to a report by Reuters on Friday, January 24, 2020, about 70 lawmakers from Japan’s ruling party, the Liberal Democratic Party (LDP), led by the country’s former economic minister, Akira Amari, plan to propose the idea of a digital yen to the Japanese government.

Also, the proposed digital yen would be a collaborative effort between the government and private companies. Furthermore, the 70 lawmakers are looking to present their proposal to the government by February 2020.

Earlier, Japan’s Finance Minister, Taro Aso, said the Chinese yuan becoming a ‘means of international settlement’ would pose a major problem for Japan.

Speaking on the need to roll out a digital yen, Norihiro Nakayama, a major member of the group, said:

“The first step would be to look into the idea of issuing a digital yen. China is moving toward issuing digital yuan, so we’d like to propose measures to counter such attempts”

Japan has not been very keen on the matter of a national digital currency, but the government has not been completely quiet either. Back in November 2019, the Governor of the Bank of Japan (BoJ) revealed that the bank was not in a hurry to launch a CBDC but was studying the modalities for a digital yen.

Recently, the (BoJ), along with five other central banks of Sweden, Canada, the UK, the European Central Bank (ECB), and Switzerland, collaborated with the Bank of International Settlements (BIS) to form a group that would investigate the potential cases of CBDCs in their countries.

Speaking on the matter of a Japanese CBDC, Takahide Kiuchi, a former board member of the BOJ, believes, however, that the digital yen seeks to serve a different purpose from China’s digital yuan.

Kiuchi further said:

“The BOJ probably won’t want to do anything that would stifle private-sector innovation. The best way could be to issue a hybrid-type digital currency that is operated and issued by private firms, with the central bank’s involvement”.

CBDCs Gaining Momentum

There has been a marked increase in the number of central banks studying or willing to launch their own national digital currencies. According to a recent report by the Bank of International Settlements (BIS), the survey which covered 66 central banks, revealed that about 80 percent are working on issuing their own CBDC.

The interest in CBDCs increased after Facebook announced plans to launch Libra, a piece of news that was not well accepted by many governments and regulators.

In the meantime, more banks have joined the CBDC bandwagon, with some more progressive than others. Turkey’s central bank announced that it was going to conduct the final testing on its digital lira in 2020. Recently, the central banks of Thailand and Hong Kong issued a joint statement on the progress of their joint CBDC research project, called Project Inthanon-LionRock.