Japan wants to adopt a law on issuing foreign digital currency to a central bank in line with the currency commissioner next door. The digital yen will not bring down the US dollar anytime soon, but the Chinese currency’s growing popularity is evident in both world reserves and international trade.
Kozo Yamamoto, Chairman of the Monetary Board of the Liberal Democratic Party and a former Ministry of Finance official, believes Japan needs to review the mandate and obligations of the Bank of Japan (BoJ) in the CBDC case.
Changing the Law
According to a report on October 12, Yamamoto said that a possible change to the previous Trade Union law could be an excellent alternative to considering changes, such as job creation during the central bank’s tenure. Also, the official acknowledged that the revised US Union law should include provisions on the cost of inflation:
Yamamoto’s remarks came after the BoJ officially revealed its plans to prove the digital yen concept by 2021. The message received here is part of the first joint report from the Central Bank of Japan to the CBDC, published on October 9. With this announcement, the BoJ stated that it does not plan to launch CBDC soon.
Japan seems to take its personal CBDC very seriously amid China’s aggressive advances with digital yen. On October 9, Japan’s Deputy Finance Minister warned global groups about the possible dangers that China should take advantage of the CBDC release.
The Main Obstacles to the Digital Yen
Earlier, the BoJ addressed two main technical constraints: universal access and sustainability. The first concern is ensuring accessibility for everyone, including those who do not own a smartphone. Surprisingly, according to Nikkei, in 2018, only 65% of Japanese owned a smartphone.
The BoJ said, “It is important to develop the CBDC so that it is available to different users.” Resilience refers to offline availability when the power gets turned off. The BoJ emphasizes the importance of accessibility in any environment, including emergencies like earthquakes.
Digital Yen and Blockchain
The BoJ is considering using blockchain for CBDC. Centralized systems have the advantage of “having large capacity and fast transaction speeds,” but the entire system can suddenly fail at a point of failure.
In contrast, DLT-based CBDCs can overcome a single point of failure and demonstrate resilience. However, they require longer transaction times as blockchain networks require consensus among multiple validators.