Hiromi Yamaoka, the former chief of the Bank of Japan’s financial settlement department, cautioned against adopting the digital yen as part of the country’s monetary strategy, according to an article in the Japan Times.
Yamaoka believes that if the digital yen becomes a popular instrument for mass payments, then the general population will be forced to suffer the brunt of this national currency’s depreciation. He stated that the digital yen may threaten financial stability and have negative economic consequences.
Yamaoka presently chairs a forum of 74 companies, including some of the country’s largest banks. The forum is working on the introduction of a private digital currency, which might happen as soon as April of this year.
The BOJ released a three-phase trial framework for its central bank digital currency (CBDC) in October 2020. The trial’s first two stages will focus on proving the idea, while the third part will include a pilot.
The first phase already started in April 2021 and will be completed by March 2022. After it, the BOJ is planning to begin the second phase, which will examine the technical elements of the digital yen’s issue.
Japan is among one of the first countries to enact crypto rules. However, use of cash payments overrides in the Japanese retail industry due to natural disasters that frequently knock out electricity.
The central bank also released a study paper in July 2020 that focused on the development of an offline CBDC.