Japanese Policymaker Downplays Fears of Dominance of Digital Yuan
The top policymakers in Japan appear to be disillusioned with the prospect of China taking the top position in the race for CBDC development. A government official appreciated the efforts made by numerous countries in the development of Central Bank Digital Currencies (CBDCs) this week and explained that it was extremely difficult for one country to take full dominion. According to a report by Reuters, Japan’s top financial diplomat’s vice-finance minister, Kenji Okamura is confident about their fast-track development of a CBDC and the possibility of blocking China from using its own CBDC as the global reserve asset.
Heading the CBDC efforts of the Bank of Japan, Okamura told the news source that a lot more countries are now trying to bolster their financial systems with CBDCs, which means that the head start by China may not make much of a difference at the end of the day. As per the policymaker, currently, Japan is keeping tabs on the progress made by others, so it doesn’t get left behind. He said that they wanted to know what other central banks were doing in order to learn from them, not only from China but from others as well.
This is a major departure from the statement that was made just last week. It was reported that Okamura had been concerned about the progress China was making with the digital yuan and the fact that the country would be able to gain an advantage over others by moving in first. The Official Monetary and Financial Institutions Forum had conducted a digital seminar where Okamura highlighted that China was developing its CBDC at a much faster pace than anyone had envisioned. This speed meant that the superpower would be able to make the digital yuan as the global digital currency, thereby overrunning the global financial system.
It remains unclear as to why the policymaker changed his mind. However, it appears that he is more confident about the ability of other countries in making progress and getting results at a faster pace. One of the few countries that have attempted to match the progress of China in coming up with a state-backed asset in Japan. Initially, the country had launched its CBDC initiative for matching China’s progress amidst fears that its neighbor would become too powerful. Since then, they have come quite a long way after they confirmed working on a CBDC this year.
It was reported by the Bank of Japan last week to the Bank of International Settlements that they were ready to introduce a proof of concept for its digital currency in 2021. According to the document, the first of multiple testing initiatives would be launched in 2021.
Reports indicate that the bank is working on developing an asset that would work both online and offline, which ensures that citizens wouldn’t get stranded in case of a natural disaster. However, they have not yet provided any details about how they plan on achieving it. Okamura also said that they might impose caps on the quantity of the asset and how much people would be able to hold.