Japan is set to continue with the development of its central bank digital currency project (CBDC). This is despite the initial caution shown by its central bank, and the testing phase will begin in the spring of 2021. 

Japan in an experimental phase for digital currency

Japan is playing a balancing act in the race for central bank digital currencies. The country currently has no official plans for a CBDC but is developing a project in the background that can be released if the need arises. 

This was confirmed by the Bank of Japan’s Governor, Haruhiko Kuroda, during the FIN/SUM 2021 conference. Kuroda acknowledged that the institution is aware of the significant changes taking place with the arrival of a digital society. 

He further revealed that the bank was taking the opportunity to consider the best way to develop a digital currency and hinted that tests would begin in the spring of 2021. “Japan has prepared to conduct experiments in accordance with [our approach]. We have finally planned the tests for spring 2021,” he said. 

The race has started

Haruhiko Kuroda also explained that he had observed other countries’ progress in the matter, recalling that 86% of central banks would work on digital currencies at the moment. 

Officially, Japan’s position remains strict, but the country is preparing for any global status change on central bank-issued digital currencies. Phase 1 of the development of a proof of concept is about to begin. It will be followed by phase 2, with a complete test environment. The central bank of Japan will then conduct a pilot program” if it considers it necessary “.

Despite cautious communications from the Bank of Japan, it is almost certain that the country will release its Digital Yen in the future. But the trigger will surely be external and will come from advances from other large economies.