The use of the digital yen, Japan’s version of the central bank digital currency (CBDC), will be tested in a pilot program that will begin in April, the country’s central bank announced on Friday. Shinichi Uchida, executive director of the Bank of Japan (BoJ), announced this during the fifth session of the BoJ Liaison and Coordination Committee on Central Bank Digital Currency.
Uchida said that the bank intends to develop an experimental system. He further added that the purpose of the pilot program is twofold: first, to verify the technical viability; and second, to employ the technological and operational expertise of private firms in developing a CBDC ecosystem in the case of social deployment.
Experimenting with the Digital Yen
Regarding how to progress with the pilot program, the BoJ will begin its experiments with limited objectives, progressively expanding its scope in a measured and deliberate manner. Currently, BoJ does not presume that retailers and customers would engage in real transactions; only simulated transactions will be handled in the test environment.
BoJ will keep communicating externally in a highly transparent manner, disclosing topics such as pilot program details and progress reports. The move follows more than two years of proof-of-concept trials using the digital yen by the Bank of Japan, while China’s digital yuan continues to dominate the CBDC race worldwide, which has expanded to more than 105 countries.
The move also coincides with a leadership transition at the Bank of Japan, with Kazuo Ueda poised to succeed Haruhiko Kuroda, whose second five-year tenure ends in April. Nikkei reported in November 2022 that the BoJ would conduct experiments on a digital yen with three megabanks and local banks beginning in the spring of 2023.
At this time, as mentioned before, the pilot is not anticipated to involve any actual retail-to-consumer transactions. The bank said that it will form a CBDC Forum and encourage private enterprises involved in retail payments or related technologies to join the forum.
