Japan Considering Digital Yen to Compete with China’s Digital Yuan

The Japanese government is considering a digital yen in response to the development of China’s digital yuan

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Japan is set to begin discussions on the possibility of launching a digital version of its sovereign currency.

Lawmakers will introduce a proposal to central government which would mark the beginning of the process that could see Japan issuing its own digital currency. The proposal is due to go before parliament by the end of the month.

Why should the yen to go digital?

The initiative is driven by the threat of digital currency projects by China and Facebook’s Libra. Parliamentary vice-minister for foreign affairs, Norihiro Nakayama said, “China is moving toward issuing digital yuan, so we’d like to propose measures to counter such attempts.”

Many believe that the size and influence of a digital yuan or Libra could have the power to destabilise the global financial system.

Japan’s finance minister, Taro Aso, admitted that the rise of a Chinese digital currency as a means of international settlement would present “a serious problem” for Tokyo as Japan currently settles most of its transactions in US dollars.

the rise of a Chinese digital currency as a means of international settlement would present “a serious problem” for Tokyo as Japan currently settles most of its transactions in US dollars

The path to a new currency

The group of lawmakers working on the proposal is made up of 70 influential ruling party members and is led by Akira Amari, a former economic minister.

A digital yen is still a long way off due to a number of technical and legal challenges which will need to be overcome first. However, Tokyo has been active in keeping up to date with the latest global financial technology developments.

The Bank of Japan (BOJ) recently announced plans to share expertise in the creation of digital currencies with 6 central banks across the world – Great Britain, the EU, Canada, Sweden and Switzerland.

Prime Minister Shinzo Abe said the government will work closely with the BOJ to study digital currencies, the objective of which is to extend the reach of digital yen as a tool for settlement.

The new currency would be a collaboration between the government and the private sector. Former BOJ board member Takahide Kiuchi stated that the “BOJ probably won’t want to do anything that would stifle private-sector innovation. The best way could be to issue a hybrid-type digital currency that is operated and issued by private firms, with the central bank’s involvement.”

Japan’s growing crypto options

Another upcoming addition to Japan’s digital currency market is from the popular Asian messaging app, Line. Line’s cryptocurrency is set to be made available in Japan by April 2020. The currency’s Japanese release was held up by regulatory issues. However, it recently received approval from the Japan Virtual Currency Exchange Association (JVCEA), so its release should now run smoothly.

What do you think about the rise in digital currencies? Will they make life easier or more complicated for you? We’d love to hear your thoughts in the comment section below.

"Otsumami" - a bite size snack:

In considering a digital yen, the Japanese government is taking a necessary step to ensure it’s not left behind.

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Contributor

Written by Catherine McGuinness

Writer and Journalist with a love for all things Japan.

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