The Bank of Japan and its CBDC

This week, the Bank of Japan published the English translation of its “Annual Review 2023”, covering the fiscal year that ended in March, and there were eight mentions of “CBDC”, which we extracted below. Please note that a key word search for terms including “stablecoin”, “crypto” or “cryptocurrency”, “tokenization”, and “digital money” did not return any results.

Enhancement of Payment and Settlement Systems and Market Infrastructures

In order to effectively implement measures to enhance payment and settlement systems and market infrastructures, the Bank conducts research and analysis on the safety and efficiency of payment and settlement systems as well as on the financial system and financial markets, in addition to fundamental research on related issues. With regard to Central Bank Digital Currency (CBDC), a new form of digital central bank money that is different from the deposits in current accounts that financial institutions hold at the Bank, although the Bank currently has no plan to issue a CBDC, it has been conducting the explorations necessary to be able to respond appropriately to changes in circumstances, from the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems.

Performance Reviews of Measures Taken under the Medium-Term Strategic Plan

With regard to Central Bank Digital Currency (CBDC), the Bank, in accordance with “The Bank of Japan’s Approach to Central Bank Digital Currency,” advanced steadily in coordinating with stakeholders at home and abroad, mainly by conducting experiments and exploring requisite institutional arrangements, as detailed below.

• As for experiments with CBDC, the Bank completed Proof of Concept (PoC) Phase 2 in fiscal 2022 and made necessary arrangements to launch a pilot program in fiscal 2023.
• As part of its exploration of requisite institutional arrangements, the Bank released “Liaison and Coordination Committee on Central Bank Digital Currency ‘Interim Report’” in May 2022 and an issue of the Payment and Settlement Systems Report Annex Series in fiscal 2022.
• The Bank held meetings of the “Liaison and Coordination Committee on Central Bank Digital Currency” in April and November 2022 as well as in February 2023. It shared details and exchanged views with the private sector and the government regarding, for example, updates on and findings from the PoCs, institutional arrangements, and items to be examined in the pilot program.
• The Bank hosted meetings of the “Future of Payments Forum: Digital Currency Subcommittee” in June and December 2022. It exchanged views with a wide range of relevant parties on specific technologies and approaches that could be utilized for CBDC.
• The Bank, as a member of the group of major central banks assessing potential cases for CBDCs with the Bank for International Settlements (BIS), participated in deliberations and actively exchanged views with other major central banks on progress in initiatives taken in each jurisdiction as well as common issues.

[…]

With regard to CBDC, the Bank, in accordance with “The Bank of Japan’s Approach to Central Bank Digital Currency,” advanced steadily in coordinating with stakeholders at home and abroad, mainly by conducting experiments and exploring requisite institutional arrangements. In addition, it actively contributed to discussions at home and abroad regarding the new possibilities and challenges that advances in information technology (IT) present for payment and settlement services, while making steady progress in working toward the enhancement of such services in Japan.

[…]

In fiscal 2023, with respect to payment and settlement services, the Bank will continue to work toward the enhancement of payment and settlement services in Japan by, for example, steadily promoting the CBDC pilot program, exploring requisite institutional arrangements, and contributing to related discussions at home and abroad.

This article is part of our Tokyo FinTech Publication, please follow us to read more from our writers, like hundreds of readers do every day. Please also register for our short weekly digest, the “Japan FinTech Observer”, on Medium or on LinkedIn.

Should you live in Tokyo, or just pass through, please also join our Tokyo FinTech Meetup. In any case, our YouTube channel and LinkedIn page are there for you as well.