Japan will need several years before it can put in place a Central Bank Digital Currency (CBDC) according to a top Bank of Japan official. Japan’s long potential weight would be caused by a fear that the introduction of such a currency would trigger massive outflows from private bank deposits.
The Bank of Japan’s former head of payment and settlement system, Hiromi Yamaoka, gave this opinion in an interview with Reuters on Nov 17. Yamaoka today chairs a group of banks looking to build a common settlement infrastructure for digital payments. The former BOJ head, therefore, spoke from the perspective of a payments expert and went on to say that a Japanese CBDC would make no sense if it couldn’t be operationalized widely.
“The fundamental question, and a very tricky one, is how to ensure private deposits and a CBDC co-exist. You don’t want money rushing out of private deposits. On the other hand, there’s no point issuing a CBDC if it isn’t used widely.”
Yamaoka also offered another potential roadblock for a potential CBDC. He said that the BOJ could try to prevent massive capital outflows by restricting the amount of CBDCs that could be held by a single entity. The move could potentially backfire as well, according to him because it could trigger conversion fluctuations from a CBDC to other forms of money. Such a scenario would make payments and settlements less convenient.
Yamaoka’s comments came shortly after the BOJ published a report that announced plans to run the digital Yen pilots in 2021. Yamaoka also said that the Bank of Japan and the private sector were working to make digital payments more convenient. He stressed that the private sector would play a huge role in making various settlement platforms interoperable. There could be some eventual good news after all when it comes to payments. Maybe the BOJ in conjunction with private players could in the future find a way to incorporate a CBDC that would help instead of hinder.
Image Courtesy of gettyimages
