The Bank of Japan (BOJ), Japan’s central bank, has stopped plans to introduce a digital yen in the form of a CBDC for the time being and put them on hold. The reason given is that there is not enough interest in a digital yen as a means of payment among the general public.
Although work on the creation of a digital central bank currency (digital yen) has been underway since 2021 and the third and final phase was now to begin with a pilot run with selected participants from the private sector and end consumers, the entire project was stopped at short notice and put on hold for the time being.
The reason given for stopping the introduction of a CBDC in Japan was the lack of interest in a digital yen among the general public. Currently, there is no reason to introduce a digital central bank currency in Japan, as the Japanese public has virtually unlimited access to banking and payment systems, including internet banking.
Not enough public interest in a digital yen
Among the general Japanese population, payment methods with cash or private credit and bonus cards enjoy the highest reputation. Many Japanese love to collect points when shopping, which they can exchange for rewards or shopping vouchers.
And cash is still a very popular means of payment among the Japanese, with a good 20 % of the gross domestic product being paid for with cash.
Therefore, the BOJ currently sees no reason to introduce a digital central bank currency as a general means of payment. The Japanese population’s high affinity to cash and private payment and discount cards is directly related to the high average age of the Japanese population.
An ageing population finds it difficult to adopt new developments, this is true even in the high-tech country of Japan.
Were all the developments in vain?
But then why did the Japanese central bank have a digital central bank currency developed in the first place if it is not needed in Japan? The answer to this question is simple and pragmatic:
A high-tech country like Japan cannot afford to lag behind in important new developments. Development is important for the Japanese financial system and with the current state of development work, a digital yen can be introduced quickly at any time.
In any case, according to its own statements, it is important for the Bank of Japan to be up to date with the latest developments in blockchain technology and to be familiar with the topic. Perhaps the time will also come in Japan in the not too distant future when the population is ready for a digital yen.
Importance of digital central bank currencies increases
Central banks in almost all major economies around the world are working on digital central bank currencies. The International Monetary Fund (IMF) has also confirmed the increasing importance of some cryptocurrencies and digital central bank currencies.
Some central banks are planning to combine digital central bank currencies with physical payment cards and an integration of major cryptocurrencies. The combination of digital currencies and physical payment cards will enormously accelerate the acceptance of the use of digital currencies.
It is precisely from this point of view that the question of the energy consumption of digital currencies must be solved. In times of mass acceptance, when various digital currencies are used as official means of payment by the general population, the energy factor cannot be ignored.