The Bank of Japan’s top economist has landed a plum new role: heading up a department that is overseeing the development of central bank digital currencies (CBDCs.)
According to a Reuters report on July 31, Kazushige Kamiyama’s appointment comes as the world’s third-largest economy makes a concerted effort to embrace financial innovation—and avoid being left behind.
The Bank of Japan’s payments and settlements department has played an instrumental role in examining the viability of CBDCs. As reported by Modern Consensus back in January, the BoJ has performed joint research with central banks in Canada, Sweden, Switzerland, and the European Union.
A big shift in attitudes
Kamiyama’s appointment is significant considering that Japan is somewhat behind the curve when it comes to cashless payments, let alone a CBDC.
Japanese consumers are notoriously reluctant to embrace digital transactions. By 2025, the country is hoping that 40% of settlements will be cashless. This figure already stands at 96% in South Korea and 66% in China, showing how far Japan has to go.
And China is far ahead of the rest of the world in creating a central bank digital currency, with a digital yuan already being tested in four cities.
Despite considerable pushback, especially from the country’s elderly, the Bank of Japan’s caution surrounding CBDCs appears to be diminishing.
It recently established a taskforce focused on these digital assets, and has been seeking expertise from the private sector. Earlier in July, the Nikkei news agency also reported that CBDCs are going to feature in Japan’s official economic plan, known as the Honebuto Plan for Economic and Fiscal Revitalization.
This newfound urgency came as Japanese politicians warned that the country was in real danger of being left behind. Back in March, House of Representatives member Kozo Yamamoto told Cointelegraph: “If Japan doesn’t issue a digital currency and people in the world use other digital currencies, the Japanese yen will be forgotten and lose its sovereignty.”
It appears that Kamiyama has the right credentials for taking on this CBDC-focused goal. During his time as the Bank of Japan’s top economist, he spearheaded efforts to ensure big data is used to analyze the country’s economic activity. According to Reuters, this helped the central bank react to real-time changes in consumption during the COVID-19 pandemic.
The race is on
The quest for central bank digital currencies isn’t solely about modernizing the economy and delivering innovation to consumers—it’s also about control. Many economies, Japan among them, are clearly worried that private digital assets could undermine their fiat currencies.
Indeed, there have been some ruminations that China’s enthusiasm for its digital yuan lies in how it could be used to attack the dominance of the U.S. dollar, and potentially ramp up surveillance on how the public spend their money.
As reported by Modern Consensus earlier today, the People’s Bank of China is also attempting to initiate an anti-trust investigation against Alipay and WeChat Pay—two companies that collectively control 94% of the digital payments market. That’s despite the fact that these businesses have played a prominent role in the central bank digital currency trials now ongoing in Shenzhen, Chengdu, Suzhou, and Xiong’an.
Such an investigation could be Beijing’s way of flexing its muscles and reasserting control of the digital payments space.