May 20, 2022
Bank of Japan

A senior official at the Bank of Japan has confirmed that the central bank will not introduce a digital yen as a means to achieve negative interest rates.

The idea has been touted by some economists, but The BoJ’s executive director Shinichi Uchida confirmed it would not be the grounds for the introduction of a central bank digital currency (CBDC).

“While the idea of using such a functionality as a means to achieve a negative interest rate is sometimes discussed in academia, the Bank will not introduce CBDC on this ground,” Uchida said in a speech.

The bank has already carried out extensive analysis of the feasibility and impacts of issuing a CBDC, and plans to launch further experiments this month. Whilst no decision has been made yet whether these experiments will lead to the issuance of a digital yen it is certainly a possibility that Japanese authorities are entertaining.

The upcoming experiments are expected to explore factors such as the impacts of varying transaction limits and whether it would be beneficial to make the digital currency interest-bearing.

Bank governor Haruhiko Kuroda was keen to play down the possibility of an imminent CBDC launch, announcing at Japan’s FIN/SUM fintech summit earlier this month that no such plans are in the pipeline.

Kuroda made it clear that further analysis was needed before issuance could be considered. “We consider it important to prepare thoroughly to respond to changes in circumstances in an appropriate manner, from the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems,” said the official.