Japan’s central bank digital currency (CBDC) project so far has been modest. It only started the experiment in April, with no specific timeline to issue the digital yen. It is not too far behind other countries, as most, including its next-door neighbor South Korea, aren’t planning to release their digital currencies any time soon — except for China.
Takayuki Kobayashi, Japan’s first-ever economic security minister, recently asserted that “Japan must speed things up so it’s ready to issue a digital yen any time,” while suggesting that its national security may be affected if other nations advance on their own CBDCs.
China has made ambitious strides with its digital renminbi, or e-CNY. The country has already completed test runs in 10 of its major cities, with some speculating it will be launched in time for the Beijing Winter Olympics in February.
Yoshitaka Kitao, the CEO of Japan’s SBI Holdings, told local media that “China is the most advanced nation in the field of CBDC [technology], with the United States and Europe following suit.”
China’s e-CNY ambitions have geopolitical implications.
“Whichever country comes up with a good digital currency first, that’s likely to be copied. And so it’s rather like, you’re setting out the ground rules for how these are going to work, going forward,” said Andrew Sullivan, founder and writer for Asianmarketsense.com, in an interview with Forkast.News.
“And that’s a worry for a lot of people because obviously the way that China treats personal data and the amount of data it carries on its own citizens is much greater than any other country in the world. And there are far less checks and balances on what it can do with that data,” said Sullivan, pointing out the privacy concerns surrounding China’s digital yuan adoption.
Furthermore, Sullivan believes China is aiming to claim Asia under its digital renminbi. “The more they can push the U.S. dollar out of Asia, the more that makes the renminbi the currency for Asia,” he said, adding that cornering the Asia market with e-CNY will give China more control over finances and the amount of money in the system. “It will therefore be less reliant itself on the U.S. setting interest rates or the U.S. printing money.”
The economic alliance Japan shares with the U.S. could also be threatened if the digital yuan take the reins in Asia.
One unnamed official under Japan’s new prime minister, Fumio Kishida, told Reuters the country needs to work with the U.S. against any attempt to take over the dollar’s reserve-currency status, and that the Bank of Japan — the country’s central bank — and the finance ministry will accelerate progress on preparing the issuance of the digital yen. The Japanese government has also increased operatives looking into legal and technical aspects of the actual issuance, although it hasn’t made any direct investment since Kobayashi’s comments.
Meanwhile, South Korea’s central bank deputy governor Bae Joon-suk said at its payment and settlement systems conference that its CBDC development is “not one step behind that of any other country.” Bae added that the Bank of Korea will have the technology ready to issue the digital currency as soon as a decision is made.
The Kishida administration, which took office in October, puts economic security on top of its agenda. With the expected launch of the e-CNY and other countries planning their own digital currencies, Japan may soon prioritize developing its own CBDC.