TOKYO (Kyodo) -- The Bank of Japan plans to start testing the feasibility of a digital yen with major Japanese commercial banks next spring, sources familiar with the matter said Thursday.
The experiment, which will allow ordinary consumers to participate, is aimed at checking whether money deposits and withdrawals via bank accounts at commercial banks can be carried out smoothly with the use of a central bank digital currency, the sources said.
The BOJ has taken the position that it has no plans to issue a digital yen, but has begun checking the stability and feasibility of payment systems should it decide to issue such a virtual currency in the future.
Globally, major central banks are also making preparations, with the U.S. Federal Reserve carrying out experiments and the European Central Bank looking into the feasibility of a digital euro. Far ahead of them is China, which has already launched pilot programs for its digital yuan.
Governor Haruhiko Kuroda said in January that the BOJ would be able to decide whether to issue a digital currency or not by around 2026, noting that it was his personal view.
If the BOJ decides to issue a digital yen, one viable option will allow consumers to use the currency via a special app on their smartphones.
Still, challenges remain for a central bank digital currency to be issued and used widely by the general public. Authorities need to ensure that a CBDC can be used even in times of an emergency, such as natural disasters, and that it can be protected against counterfeits or cyberattacks.
The BOJ has been in the second phase of its experiments to study the feasibility of a digital yen since April, examining functions such as money transfers, among others.
After the current phase, the Japanese central bank is hoping to cooperate with the country's megabanks such as Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc.
Japan has been traditionally known as a cash society, but the government has been promoting a cashless one, with the COVID-19 pandemic adding to the momentum.