Analysis-Japan is keen to accelerate the launch of the digital yen as China adds a geopolitical twist

File photo: A man wearing a protective mask stands in front of the headquarters of the Bank of Japan during the outbreak of coronavirus disease (COVID-19) in Tokyo on May 22, 2020.Reuters / Kim Jeong Hoon / File Photo

December 1, 2021

Reika Kihara

Tokyo (Reuters) – Japan’s new political leadership points out China’s much faster progress as a potential challenge to the global economic order and strengthens its efforts towards the issuance of digital currencies. I am calling to the station.

The government has increased its staff to investigate the legal and technical aspects of the issuance of the Central Bank Digital Currency (CBDC), the digital form of existing currencies.

Political interests have not yet been reflected in other direct investments, analysts say, but the Bank of Japan may continue to be pressured to shift from a cautious baby-step approach to issuing digital yen. high.

Takayuki Kobayashi, the newly established Minister of Economic Security under Prime Minister Fumio Kishida’s administration, said, “We must consider what will happen to Japan’s national security if other countries promote CBDC.” ..

“Japan needs to speed things up so that it can issue digital yen at any time,” he said.

China, the world’s front runner, is already testing the potential launch of digital yuan next year in major cities. Japan, along with other G7 developed countries, is moving much slower.

The Bank of Japan has just started the first phase of the experiment in April and has stated that it has no immediate plans to issue a digital yen. The pilot program, if any, will not run until 2023 at the earliest.

As Fumio Kishida has made economic security a policy priority and has put together a question about CBDC beyond finance into one of national security, its lukewarm stance may be tested.

The G7 central bank generally agrees with the need to counter China on privacy issues, but this case is especially strong for Japan, as lawmakers are concerned about the growing economic power of its neighbors. ..

Some leading ruling party lawmakers see China’s progress on CBDC as a potential threat to the dollar’s position as the world’s reserve currency and the financial advantage of Japan’s largest ally, Washington.

Fumio Kishida told Reuters that “we must work closely with the United States to counter any attempt to threaten the status of the dollar’s reserve currency,” and the Bank of Japan will expedite the issuance of the digital yen. He added that he is coordinating with the Ministry of Finance.

Opposition also called for an election campaign platform to speed up the CBDC program.

Bank of Japan officials say China’s plan does not directly affect the time frame of the CBDC experiment, as the main purpose of issuing digital yen is to provide the public with convenient and efficient payment and payment tools. It states.

What could affect the Bank of Japan more than China’s plan is how quickly European and US counterparts will announce plans to issue a CBDC.

With the Kishida administration announcing details of its economic security plan and China promoting digital yuan at the Beijing Winter Olympics in February, the debate over the issuance of digital yen could intensify next year.

“It is clear that the Kishida administration and the ruling party are enthusiastic about issuing digital yen,” said Takahide Kiuchi, a former BOJ board member who is currently an economist at Nomura Research Institute in Japan.

“If China announces a digital yuan next year and the European central bank announces plans to issue a digital euro, it will have a huge impact on Japan and put a lot of pressure on the Bank of Japan.”

(Report by Reika Kihara, additional report by Kaori Kaneko and Satoshi Kajimoto, edited by Kim Coghill)

Analysis-Japan is keen to accelerate the launch of the digital yen as China adds a geopolitical twist

Source link Analysis-Japan is keen to accelerate the launch of the digital yen as China adds a geopolitical twist

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