Japan will likely need several years before the central bank can issue the digital yen, according to comments by Hiromi Yamaoka, former head of the payment and settlement systems division at the Bank of Japan.
More than 30 major Japanese companies begin experiments next year towards issuing a joint private digital currency to promote digitization in one of the most cash-loving countries in the world, according to the group’s regulator.
The move comes on the heels of the Bank of Japan’s newly announced plan to test the issuance of the digital yen, confirming the growing awareness of the need for Japan to catch up with the rapid global progress in financial technology.
The group, which consists of major banks in Japan as well as brokers, telecom companies, utilities and retailers, is experimenting with the issuance of a digital currency that uses a common platform.
“Japan has many digital platforms, and none of them are big enough to beat cash payments,” said Yamaoka, who heads the group.
“We don’t want to create another platform, but rather to create a framework that can make multiple platforms mutually compatible,” he added.
He said that private banks will be responsible for issuing digital currency in experiments, although the possibility of other entities issuing digital yen is not excluded.
Japan is among the most cash-loving countries in the world, with cashless payments accounting for only 20 percent of total spending, well below the United States by 45 percent and China by 70 percent.
Japanese authorities have been keen to boost cashless transactions to increase productivity, although progress has been slow in part due to the inadequacy of digital payment.
Many digital platforms compete and remain incompatible with each other in Japan unlike in China, where a host of huge platforms dominate the market.
The three Japanese giants – Mitsubishi UFJ Financial Group, Mizuho Financial Group, and Sumitomo Mitsui Financial Group – have rolled out their digital payment systems, but are lagging behind the efforts of tech firms such as PayPay, a subsidiary of SoftBank.