Japan Flirts With Digital Currency as Cash Loses Its Crown

The Bank of Japan (BOJ), Japan’s central bank, is reportedly looking to digital currencies as its citizens go cashless.

While the country has long adhered to a “cash is king” ethos, the share of cashless payments in Japan jumped from 13.2% in 2010 to 42.8% last year, Reuters reported Wednesday (June 11), citing government data.

Japan has trailed other countries in payments technology, but the rise of cashless transactions has forced the government to make sure it is ready to handle the shift. That means the possible establishment of a central bank digital currency (CBDC), the report said.

Although there has been no decision on the creation of a digital yen, the BOJ began a CDBC pilot in 2023. This made the country one of the largest economies in the world to progress to the pilot stage of developing a CBDC.

The central bank has been consulting with private companies and the government on the framework and design of the coin, according to the report.

“Although banknote issuance remains high in Japan, usage of notes could fall significantly in the future amid rapid digitalization,” BOJ Executive Director Kazushige Kamiyama said in a meeting last week with private firms involved with the pilot program, per the report. “As such, Japan must consider what steps it can take now to ensure its retail settlement system is convenient, efficient, accessible universally, while being safe and resilient.”

BOJ Deputy Governor Shinichi Uchida said a CBDC may become “a critical piece of infrastructure” guiding the future of Japan’s payment and settlement systems, but he maintained that he did not foresee demand for cash fading in Japan in the near future, according to the report.

Meanwhile, the use of cash in payments continues to drop in other parts of the world. For example, in-store cash transactions in Latin America fell from 67% in 2014 to 25% last year, according to the PYMNTS Intelligence report “Digital Developments: Charting Digital Payment Growth in Latin America.” This share is expected to drop to 17% by 2030.

In the United States, the Treasury Department plans to phase out the penny, the country’s smallest form of physical currency.

“In 2024, it cost nearly 3.7 cents to produce a single penny — almost four times its face value — resulting in annual losses exceeding $56 million for the U.S. Mint,” PYMNTS wrote May 31.

The post Japan Flirts With Digital Currency as Cash Loses Its Crown appeared first on PYMNTS.com.