On January 24, Reuters reported that around 70 lawmakers from Japan’s Democratic Party had joined together to push for the creation and issuance of digital yen. As emphasized in the report, the joint effort is the government’s response to the forthcoming digital yuan of China.
As per the proposal, the lawmakers are willing to work alongside private companies and entities to develop the digital version of yen. The group, who is fully aware of the growing global interest towards central bank digital currencies (CBDC), targets to pass the proposal in February.
According to analysts, the development of digital yen might pick slow progress due to Japan’s late decision. Furthermore, the proposal would lead to a significant change. Notably, it was only last December when the central bank of Japan announced that the country doesn’t need a CBDC.
What inspired the Japanese lawmakers?
Just like any other nations that have announced their intention to issue a central bank digital currency, analysts link Japan’s decision to Facebook’s Project Libra as well as to China’s digital renminbi. The fear of being left out in the game in terms of financial and economic dominance was heavily discussed at the recently-held World Economic Forum.
But while both projects are controversial on their own rights, several discussions have cleared that the two initiatives have different purposes. According to Takahide Kiuchi, a former board member of the Bank of Japan, Facebook’s Libra aims to provide a worldwide frictionless payment system while the Chinese yuan is designed to strengthen the country’s financial influence.
Kiuchi also noted that the primary reason for the lawmakers behind the digital yen proposal is to replace Japan’s paper money. Notably, the government had already implemented negative interest rates, and with cash in circulation, there is no possibility to expand the policy.
Meanwhile, Taro Aso, the Japanese Finance Minister, also voiced out his fear of the Chinese CBDC, which is poised to become a prevalent settlement currency.