- Bank of Japan is not moving forward with a central bank digital currency (CBDC) at this time.
- High cash usage in Japan remains a main reason for delaying digital yen plans.
- Current research focuses on technology, blockchain possibilities, and system integration.
- Technical barriers make using public blockchains for digital yen unfeasible now.
- Japan continues CBDC research and takes part in international projects to improve global payments.
Bank of Japan officials said they have no plans to introduce a central bank digital currency (CBDC) as of now. Director Kazunari Kamiyama announced the decision during the ninth CBDC Liaison Council meeting, stating that Japan’s strong use of cash is a primary reason.
This statement followed the release of a second progress report on the digital yen pilot. The pilot program involves seven working groups and 64 private companies, all engaged through the CBDC Forum. These groups are reviewing both technical aspects and theoretical use cases for a digital yen.
One group is studying how digital yen could work with new technologies like distributed ledger technology (DLT), which is the technology behind blockchains. After examining the possibility of using a public blockchain—an open, shared database—the group found it is not currently workable. Problems include system scalability, privacy issues, and controlling how the system operates.
The research did uncover some future options, such as “layer 2” blockchain solutions, which add extra control and efficiency, and advances in privacy tools like zero knowledge proof technology. The teams are also looking into creating a stablecoin—digital money backed by CBDC value—which would require approved wallets and smart contracts.
Another working group is reviewing the use of APIs (technology that lets different programs communicate). Inspired by the UK’s Project Rosalind, the group suggested basic, modular APIs that can be combined for more complex uses. They noted that too many API requests could slow down the system. Instead, the bank is considering “webhooks,” which push transaction updates to users, much like app notifications.
Up until now, the working groups have studied system parts one by one. Bank of Japan now plans to look at how these features work together as a whole. Despite not launching a digital yen soon, the bank will keep up with research efforts.
Internationally, Japan joins Project Agorá, a BIS-led initiative with seven central banks and 41 organizations. This project aims to improve cross-border payments by combining innovations like CBDCs, digital tokens, and traditional banking.
Bank of Japan is working carefully to balance digital progress with the realities of a cash-based economy. The timeline for any digital yen depends on actual market needs, not just advances in technology.
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