The BOJ (Bank of Japan) has asserted that it will not use its CBDC (central bank digital currency), known as the digital yen, to assist in obtaining negative interest rates. Shinichi Uchida – the executive director of the BOJ – made the respective declaration in his latest public speech. He added that the concept of utilizing this kind of functionality to get a negative interest rate counts to be a topic of discussion, the CBDC will not be introduced on this basis by the Bank.
Japan originally embraced negative interest rates six years ago in 2016 to confront a decades-long deflation by inspiring spending and borrowing. Negative interest rates are just utilized as a solution on the behalf of the central banks at the time of a recession to elevate the economy by spending and borrowing, with interest being recompensed to borrowers instead of lenders.
The same statement was made on the behalf of Hiromi Yamaoka – the financial settlement department’s head at BOJ – who cautioned formerly this year regarding the likely catastrophe to be brought about by the CBDCs to the economy of Japan. Though, Yamaoka acknowledged the concept of digitalizing methods of payments, no support was indicated by him for the concept of utilizing CBDC for this purpose.
Also read:James Mackintosh – senior columnist at Wall Street Journal – has likewise argued about the disparity between cash as well as a CBDC that would become prominent if the interest rates were lowered to less than zero. People would turn toward holding cash for earning zero instead of losing money on the central bank’s issued digital dollar. Uchida, in the speech, mentioned that if the digital yen’s creation advances further, then the residents of Japan can expect the release of the CBDC with several new features.
The bank contemplates implementing a restriction over the number of funds of each organization or individual till the pilot’s time and is additionally considering whether to give a status of being an interest-bearing asset to the digital yen. Initially, the BOJ shared a trial comprising three phases for its CBDC a couple of years ago.
The first two of the trial phases are centered around evaluating the proof-of-concept whereas the focus of the third phase would be to witness the launch of a pilot currency. The second phase of BOJ’s trials was started by it on 24th March, referring to testing additional technical factors dealing with the digital yen’s issuance.
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