A local government official in Japan has said that the country needs to rapidly amend its central bank laws to allow the Bank of Japan (BOJ) to issue a national digital currency. Kozo Yamomoto, the Liberal Democratic Party lawmaker, stated that the central bank of Japan is at risk of being overtaken by private firms, which could unveil their own virtual currencies that could undermine the Central Bank Digital Currency (CBDC).
CBDC Can Create Financial Stability in Japan
Yamomoto stated that he would push the relevant agencies as well as the government to accelerate efforts to revise the BOJ laws to enable the central bank to issue a CBDC.
He has been a visible advocate and vocal for creating changes to the BOJ law that defines the roles and responsibilities of Japan’s central bank.
“If something too convenient pops up from the private sector, people might start to doubt whether they need yen as a currency unit. We must prevent this from happening. This is fundamentally about protecting Japan’s currency sovereignty.”
He said that making revisions to the laws to incorporate virtual currencies would make a significant opportunity to add other changes like introducing job creation and an inflation target to the central bank’s responsibilities and roles, as a similar scenario like the U.S federal reserve.
“The new law should also clarify that 2% inflation is the BOJ’s policy target.”
Currently, Japan’s central bank set a 2% annual inflation target, a law that was enacted in 2013 with an aim to help the nation to control deflation. However, the central bank has not enshrined the target in the BOJ law, which states that its responsibility is to ensure that national financial systems remain stable and prices move.
Central banks across the world have been assessing the strategic objectives. The European central bank wants to set a scene for a change of strategy in which it could follow the U.S Federal Reserve to aim for a 2% inflation target in order for periods when prices increase too slow could be compensated for a faster rise at another period.
On Friday, the BOJ stated that it would start conducting research in the following financial year on how to develop and operate its CBCD.
Yamomoto complained that the timeframe of Japan’s central bank was “too late”, saying that the initial phase of experiments should start during the current financial year to March 2021.
“I don’t think we need to worry about any financial stability risks from issuing CBDCs.”
Central Banks Rush to Examine CBDCs
Central banks started to closely examine digital currencies at Facebook social media giant announced that it would issue its own Libra cryptocurrency that would be backed by a combination of major fiat currencies and government debt.
Japan has not been having rapid plans to launch a national digital currency due to economic disruptions and social uncertainty it could cause in a country that has the most cash-obsessed people in the globe.
China has maintained steady progress towards launching its national digital currency, a phenomenon that has influenced the government to rethink and promised in its policy platform of this year to examine more closely at the idea of a CBDC.
With the current rapid technologies that transform the Fintech sector, other leading central banks also have speed up their research on national digital currencies.