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Japan lawmaker says digital yen has potential to reshape financial industry

Japan yen plummets
Japan spent $18.81 trillion in dollar-selling, yen-buying intervention last month. Photo: Reuters

Japan’s digital yen may spark a turf war, says Hideki Murai, who heads the ruling party’s digital currencies panel. Digital yen plan to become clearer by late next year.

(AF)  Japan’s digital yen has the potential to reshape its financial industry and may spark a turf war between traditional lenders and online platform operators, said a  top lawmaker.

Hideki Murai, who heads the ruling Liberal Democratic Party’s panel on digital currencies, told Reuters in an interview published Monday that the nation will have more clarity on what a digital yen would look like by late next year.

The Bank of Japan in April launched the first phase of its central bank digital currency (CBDC) experiment, joining counterparts aiming to match the rapid pace of private innovation. It hopes to move to the second phase next year to lay out some key functions of a digital yen, such as which entities will serve as intermediaries between the BOJ and deposit holders.

Japan’s financial industry is already facing massive change as non-bank retailers begin to offer various online settlement means, venturing into the turf of commercial banks. If the digital currency is designed in a way that makes commercial banks key intermediaries, that could shift business and data away from such platform providers back to the banks, Murai said.

“If the BOJ were to issue a CBDC, it would have a huge impact on financial institutions and Japan’s settlement system,” Murai said. “A CBDC has the potential to completely reshape changes occurring in Japan’s financial industry.”

While no immediate decision will be made on whether to issue a CBDC, more details on its design may spur debate on how CBDC issuance could affect financial institutions, he said. That could test the BOJ’s argument that a digital yen will not crowd out or meddle in private businesses, Murai said.

Murai also said the BOJ must ensure a digital yen is compatible with the CBDC of other developed nations partly to counter China’s rapid progress towards issuing a digital yuan. The BOJ is among a group of seven major central banks jointly looking into core features of CBDCs. Japan is closely watching China’s digital yuan, which the People’s Bank of China has been testing for months and some believe will be formally launched next year.

“If a digital yuan becomes so convenient it’s frequently used by tourists or becomes a main settlement means for trade, the relationship between the yen and yuan could change” and erode the yen‘s status as a safe-haven currency, Murai said.

Updated with additional details. With reporting by Reuters.



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Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years.


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