Bank of Japan official Kazushige Kamiyama Photo: REUTERS/Takahiko Wada
tech

BOJ official downplays fears over China's digital currency

12 Comments

No single digital currency will dominate global transactions if central banks strive to enhance their own settlement systems, a senior Bank of Japan official said, brushing aside fears China's rapid progress on a digital yuan could upend markets.

China, which has been ahead of other major economies in experimenting on a digital currency, has publicly said it aims to become the first to issue one to reduce its dependence on the global dollar payment system.

In efforts to catch up with China and private projects such as Facebook Inc's plan to issue its own virtual token, seven major central banks - including the BOJ - last week laid out key principles for issuing CBDCs.

Kazushige Kamiyama, who heads the BOJ's payment and settlement systems department overseeing CBDCs, said China may have a "first-mover" advantage on issuing a digital currency.

"But new technology is invented all the time. Even if you're ahead on the technology available now, you could get locked into what becomes old technology as time passes," he told Reuters.

As with other central banks, the People's Bank of China is likely developing a digital yuan mainly for the purpose of creating a stable, efficient settlement system, he added.

"I don't think a single digital currency will dominate the world, as long as each country makes full efforts to improve its settlement system," Kamiyama said.

"We'd like to keep tabs on what other central banks are doing and learn from them, not just from China but from other countries," he said.

Japan has been cautious about moving too quickly on CBDCs given the social disruptions it could cause in a country that has the world's most cash-loving population.

But China's progress toward issuing a digital yuan has prompted the government to reconsider and pledge in this year's policy platform to look more closely at the idea.

The BOJ announced last week plans to begin experimenting from next fiscal year whether it can issue a digital yen, joining peers in catching up to rapid innovation.

Kamiyama said he hopes to begin the first phase of experiments at the start of the next fiscal year in April and move to the second phase by the end of the business year in March 2022.

By sharing information on CBDC platforms, major central banks can make them mutually compatible and connect them in the future to offer cross-border settlement services, he said.

But Kamiyama said the BOJ was in no rush to issue CBDCs and would carefully examine ways to ensure a digital yen won't cause any disruptions to monetary policy and the banking system.

For example, the BOJ may set a limit on the amount of digital yen it issues to prevent an unwelcome outflow of funds from private bank accounts into CBDCs, he said.

"We're looking into CBDCs to enhance our settlement system, not to use it as a tool for monetary policy," Kamiyama said, stressing a digital yen would co-exist with bank notes.

"That means we need to ensure that issuance of CBDCs does not pose any negative impact on the economy, such as destabilising Japan's settlement system."

© Thomson Reuters 2020.

©2020 GPlusMedia Inc.

12 Comments
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When I first washed upon these shores Japan was just about to overtake the US as the most economically powerful country in the world.At that time China was nothing more than a backwater wannabe.Fast forward 30 years,after 3 decades of stagnation,and Japan is having to play catchup big time.But because of its patriarchal style of leadership it never will.

5 ( +6 / -1 )

China’s digital currency will soon make inroads into Japan just as Weipay has done...

2 ( +2 / -0 )

China will only end up being on the losing end no matter how hard or what it does to be and overtake the US. It may for a short time do so but it won't last and will be its own doom. It is destiny and can't be changed.

-4 ( +0 / -4 )

The U.S. will only end up being on the losing end no matter how hard or what it does to keep up with China. It may for a short time do so but it won't last and will be its own doom. It is destiny and can't be changed.

2 ( +3 / -1 )

BOJ like Japan itself always does this...

China will be ahead, already are. Most of them pay using their phones. Now they are working on a digital currency. What do we do? Nothing

Samsung, half of Korea becoming more and more rich, getting all the deals overseas, worth billions upon billions! What does Japan do? Nothing

We have allowed S. Korea and foreign companies to bury Japan without a fight, to win without a struggle in sight from Sony or any other company. Shame!

2 ( +2 / -0 )

Japan seems to be out of ideas and is resistant to new trends-one way thinking is the present norm...

2 ( +2 / -0 )

Careful with dark sided China !!..

1 ( +1 / -0 )

"But new technology is invented all the time. Even if you're ahead on the technology available now, you could get locked into what becomes old technology as time passes," he told Reuters.

Very good point he made there. Another good example, is North Korea versus South Korea. Sure, in the 60s, they were well ahead of South Korea at the time. Well take a look at the two countries now. Need I say more?

0 ( +0 / -0 )

And considering how disgrace that China is now, I don’t think we have to worry about them taking over anything regarding digital currency. Not on the world stage anyway. Because in order for that to work, that involves most countries trusting in China. And as we all know, most countries are moving away from China, so I really don’t see this happening.

-1 ( +0 / -1 )

@Spitfire yet, I bet you want to live in neither of those countries.

0 ( +0 / -0 )

And as we all know, most countries are moving away from China, so I really don’t see this happening.

Moving away in what form? Cutting formal ties? Cutting trade ties?

As far as I know, investors all around the world kept pouring money into China, since they are the only MAJOR economy who have effectively control the virus. And yes, that is not hoax, that is not lies spread by CCP propaganda. Many Japanese and Westerners in China has posted videos about their lives in China, on YOUTUBE.

You can search for it, if you want proof.

And until this moment right when I type this comment, I haven't found any news that many countries will sever their formal relationship with China.

But your delusion is entertaining, though. Thanks for making me laugh.

0 ( +0 / -0 )

"But new technology is invented all the time. Even if you're ahead on the technology available now, you could get locked into what becomes old technology as time passes," he told Reuters.

It really looks like he talk about his own country, Japan.

0 ( +0 / -0 )

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