First phase of experiments, to be carried out until March 2022, will focus on testing the technical feasibility of issuing, distributing and redeeming a central bank digital currency (CBDC). BOJ will thereafter move to the second phase of experiments that will scrutinize more detailed functions, such as whether to set limits on the amount of CBDC each entity can hold. If necessary, the central bank will launch a pilot programme that involves payment service providers and end users. There is no change in the BOJ’s stance it currently has no plan to issue CBDC and believes initiating experiments at this stage is a necessary step.
Global central banks are looking at developing digital currencies to modernize their financial systems, ward off the threat from cryptocurrencies and speed up domestic and international payments. While China leads the pack, the BOJ has been speeding up efforts to catch up with a plan announced in October to begin experimenting on how to operate its own digital currency.