The Block: Japan’s central bank ‘must be prepared’ to issue digital currency, says deputy governor

The Bank of Japan, the country’s central bank, must be ready to issue a digital currency if situations warrant, according to its deputy governor Masayoshi Amamiya.

“The speed of technical innovation is very fast. Depending on how things unfold in the world of settlement systems, public demand for CBDCs [central bank digital currencies] could soar in Japan. We must be prepared to respond if that happens,” Amamiya said in a seminar on Thursday, as reported by Reuters.

Amamiya’s comments are reportedly the strongest to date from a Bank of Japan executive on the potential of digital currencies. Notably, Amamiya was not keen on digital currencies as he recently said if CBDCs "replace private deposits, that could erode commercial banks’ credit channels and have a negative impact on the economy."

While Japan has no immediate plans to issue digital yen, Amamiya at the seminar said several factors must be examined, including its impact on monetary policy.

The Bank of Japan has been researching digital currencies for several months now. Earlier this month, it joined hands with five other major central banks - the Bank of England, the European Central Bank, the Bank of Canada, the Sveriges Riksbank (Sweden) and the Swiss National Bank - to explore digital currencies.

Japan’s ruling Liberal Democratic Party is also working on a proposal to issue digital currency. “China is moving toward issuing digital yuan, so we’d like to propose measures to counter such attempts,” Norihiro Nakayama, a member of the party and parliamentary vice-minister for foreign affairs, said last week.