Japan abandons CBDC project

While Japan is seen as an innovator, especially in the technological sector, there are still aspects of life in the country that remain stuck in the past, as the country is one that values tradition. This can be seen in technology like fax machines still used in office buildings, or in the case of job applicants that still must physically write their resumes. Following this idea, most people in Japan still rely on cash, despite the digitalisation that has happened in the industry lately.

Despite this, the trend toward digitalization that is currently found in the private sector has made the concept of CBDC largely redundant for the masses, as discovered in the Bank of Japan’s experiments gauging public interest in this new utility. Since 2021, The Bank of Japan has run these tests in preparation for a potential national roll-out.

After checking for the technical feasibility of shifting towards CBDC from fiat currencies, the BoJ reportedly saw no need to implement such a change in the near future. The still ongoing COVID-19 pandemic has driven the traditionally cash-reliant country toward other forms of money transfer, which include e-money payment tools, credit cards, and digital banking services. These can be easily accessed by the Japanese.

CBDC acceptance

While the initial reception was lukewarm at best, the idea of using CBDC for their transactions might still grow on the Japanese public. The Sumitomo Mitsui Banking Corporation (SMBC) recently announced the formation of its own business token lab aimed at driving up awareness and acceptance of Web3.0 and blockchain technology in the nation. On top of this, despite Japan’s international reputation as a high-trust society, some studies and locally published news articles have suggested that institutional trust may be steadily decreasing amongst the populace, particularly toward the government, as nftnow reports.

CBDCs come with their own benefits. This form of currency safeguards national wealth from instances of bank failure and affords the central bank the tools to meaningfully influence monetary policy via inflation. However, even with those pros offered by CBDC, this form of currency has not been tested enough across world markets. This might be one of the reasons why Japan is still waiting on the technology, expecting further proof of concept from other countries.

Japan is an interesting market on its own. The Paypers recently partnered Komoju to create an insightful report on the ecommerce market and the payment trends in the market. If you are interested in learning more about the particularities of the country in these areas, you can find the report here.