Bank of Japan executive director rejects CBDC launch due to negative rates

As Japan continues its quest to develop its own Central Bank Digital Currency (CBDC), the same central bank that will issue it is noticing the apprehensions of its executives.

Japan says no to CBDC, but not entirely

According to Reuters, Bank of Japan executive director Shinichi Uchida said the central bank will not introduce a Japanese yen digital currency if it is intended to be used as a means of obtaining negative rates. 

Recently, Japan has begun its experiments to introduce a CBDC potentially within the next four years, and for the same, there has been back and forth from the country's economists.

Regardless, the central bank continues to test and experiment with new features.

Currently, the experiments are in their second phase, and the BoJ plans to explore the possibility of establishing a transaction and HODLing limit on the CBDC.

In addition, the bank is also looking into whether to make the CBDC an interest-bearing asset or not. According to Uchida, by doing so the CBDC could become a substitute for bank deposits. Adding to the concern of negative rates, he said:

"While the idea of ​​using this functionality as a means of achieving a negative interest rate is sometimes debated in academia, the Bank will not introduce CBDC in this area."

Problems with CBDC

While Uchida has had problems with negative rates, former head of the Bank of Japan's financial regulation department, Hiromi Yamaoka, said CBDCs could end up destroying the economy.

While Hiromi agreed with the digitization of payment methods, he didn't support the idea of ​​using a CBDC for it. He also shared similar concerns on the issue of negative interest rates by stating:

"Some say negative interest rates might work more effectively with a digital currency, but I don't think so."

On the other hand, businesses and banks are coming with their coin offerings in the meantime. As reported by FXEmpire, Japanese trading firm Mitsui & Co. plans to issue a gold-linked cryptocurrency in the country.

However, while it can act as a stablecoin, it will not be pegged 1: 1 to the Japanese Yen but to the value of 1 gram of gold. 

While a "stablecoin" offers an adequate means of investment, is not comparable to what a real stablecoin or a CBDC can achieve. Thus, as stated by the Bank of Japan, the country may have to wait until 2026 to have its own digital currency.