Bank of Japan (Boj) says it is unsure of one Central Bank digital currency (CBDC) because cash use in the country remains high. However, rapid digitization has significantly increased cashless payments in the country in recent years, which encourages the central bank to continue to explore a possible digital yen.
Japan has long been known for having favored physical currency over digital payments. However, the volume of cashless payments has increased in the country. Partly thanks to the global pandemic, which encouraged a broader assumption of non-physical payments, increased volume of cashless payments in Japan by 36% from 2019 to 2022—in accordance with to Deutsche Bank Data.
The government also set a goal to increase the ratio of cashless payment among consumers to about 40% in 2025. By 2024, this goal had already been achieved and exceeded, such as the Ministry of Economics, Trade and Industry (Meti) recorded Cashless payment volume of 42.8%.
“Although Banknot issue remains high in Japan, the use of notes may fall significantly in the future in the middle of rapid digitalisation,” said Boj’s CEO Kazushige Kamiyama in a meeting earlier in June with private companies to discuss the bank’s CBDC pilot program, as reported by Reuters on June 11.
He added that “as such Japan must consider what measures it can take now to ensure that its retail system is convenient, efficient, available universally, while being safe and resistant.”
Speakers at the same event, Boj’s Deputy Governor Shinichi Uchida said that a CBDC could become “a critical infrastructure”, while he reportedly emphasized that he did not expect the cash requirements to disappear in Japan in the immediate future.
This meeting with Central Bank’s officials came in the light of Boj publication Its latest progress report on the CBDC pilot program in May.
The 27 pages report described various technical challenges for which the program investigated solutions, including those related to scalability and performance.
Boj concluded the 27-page report by saying that “at present it has not been decided whether Japan will issue a CBDC, and this will be decided in future national debates.”
The editor’s note: This article has been updated.
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