Former Bank of Japan (BOJ) official shares his concerns amidst plans to adopt digital yen as a monetary policy option.
Hiromi Yamaoka, former Head of the BOJ’s financial settlement department, advises against the use of digital yen as part of Japan’s monetary policy as this move could severely damage the national economy.
The Japan Times reported Yamaoka’s statement, saying he was completely against the adoption of a digital yen to gain extra policy leverage.
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One of the most concerning aspects, according to Yamaoka, is the negative interest rates. He believes that if the digital yen were to become a mainstream tool for mass transactions, the general public would be strongly affected by the value of the fiat currency plummeting.
Some say that negative interest rates could work more effectively with a digital currency, but I don’t think so.
Yamaoka warned that digital currency could negatively impact financial stability, even carrying disastrous consequences. While he agreed that Japan’s payment systems need to change with the help of digital money, the current proposition is far from the correct choice.
It’s obvious that the current payment system can’t stay as it is now. It’s in everyone’s interest to make it better and cheaper.
Yamaoka led many of the discussions on ​​central bank digital currencies (CBDCs) during his tenure at the Bank of Japan. He is currently chairing a private forum of 74 companies and entities, including some of the biggest banks in the country.
The Bank of Japan outlined a three-phase trial for its CBDC in October 2020. The first two phases focus on trialing the proofs-of-concept. Phase One started in April 2021 and is expected to wrap up in March this year. The second phase is expected to start later in 2022. Technical testing of issuing the digital yen should commence during Phase Two.
The third phase of the CBDC trial should see the piloting of the digital currency. According to Haruhiko Kuroda, BOJ Governor, the digital yen could be launched around 2026, but this decision would not be made solely by the Bank of Japan.
Although Japan was one of the first nations in the world to implement cryptocurrency regulations, the retail sector still relies primarily on cash due to frequent power outages in the country caused by natural calamities.
One of Japan’s biggest competitors in the CBDC race is China, which is planning to uphold the first major test of its digital yuan during the Beijing Winter Olympics.
