Japan is feeling the pressure of China’s strident moves forward with a digital yuan.

According to a Feb. 7 Reuters report, top lawmakers in the country are calling on their government to push for digital currencies to be placed on the G7’s agenda this year.

Akira Amari — former economy minister and a prominent member of the ruling Liberal Democratic Party — told a group of lawmakers convened to discuss the matter that:

“Japan should work in close coordination with the United States. As part of such efforts, we should ask the United States to set (digital currency) on the G7 agenda as chair.”

An end to the global dollar order?

The U.S., which is leading the G7’s meetings in 2020, is the focus of Akari’s concerns due to his view that the prospect of a digital yuan could challenge the dollar’s hegemony — and thus upend the global network of financial and geopolitical relationships built upon its role:

“We live in a stable world led by dollar settlement. How should we respond if such a foundation collapses and if (China’s move) gives rise to a struggle for currency supremacy?”

In a country that relies heavily on dollar-denominated settlement, other high-level lawmakers reportedly share Akari’s concerns, considering that the digital yuan may see high adoption among emerging economies in particular.

Currency competition

As reported, Akari is not alone in his view that China’s central bank digital currency (CBDC) project could evolve into a powerful soft power tool. One U.S. journalist recently argued that:

“China could force other countries to similarly go digital. China could mandate payments from nations with Chinese power plants or other infrastructure improvements built under the ‘Belt and Road’ initiative be in the Chinese digital currency. Enormous companies doing business in China could be similarly forced to adopt.”

While any pursuit of a digital dollar still remains largely theoretical, this week a member of the Federal Reserve’s board of governors signaled that the institution is more open to the idea of CBDC than previously.