No plans for digital currency, says Bank of Japan

Japan has no plans to issue a digital currency, said the deputy governor of the Bank of Japan Masayoshi Amamiya, in a lecture titled "The Future of Money" at the Japan Society of Monetary Economics on October 20th.

The comment was made in response to the idea that the central bank should issue its own digital currency, in lieu of bank notes, which would increase financial stability by overcoming the zero lower bound — an economic problem tied to the issuing of paper currency which limits the capacity that central banks have to stimulate economic growth.

Mr. Amamiya countered the suggestion with a practical example, suggesting that if the financial system was to experiences stress, the likelihood of funds shifting from deposits into a central bank digital currency "could have an impact on the bank’s ability to provide funding to the economy" due to a reduction in the bank’s ability to act as an intermediary. This echoes concerns raised in a report on Central Bank Digital Currencies released in June this year by the International Monetary Fund.

Moving on, Amamiya suggested that the Bank of Japan would need to thoroughly research the possible outcomes of issuing such a currency, and consider "whether digital currency would actually contribute to improvements in the effectiveness of financial policies or financial stability."

Furthermore, he noted that the introduction of a Central Bank Digital Currency to the current two-tier financial system between the central bank and private banks, would turn it into a one-tier system and "may have an impact on the utilization of information and data by private entities for payment settlements."

Tremendous hurdles to popularization

At a FinTech conference held by the Bank of Japan, the International Monetary Fund (IMF) and the Financial Services Agency in April this year, Mr Amamiya also stated that the bank has no plans to issue digital currencies.

But, the banker did not dismiss them entirely, and revealed that he considers the blockchain technology underpinning cryptocurrency to have the potential for bringing "better efficiency in transactions and payments", but that there are also "tremendous hurdles in popularizing [cryptocurrencies] as a method of payment."