Yesterday, the Bank of Japan (BOJ) held its first meeting with the “Central Bank Digital Currency Forum (CBDC)”, a newly established group of 60 companies that will meet to discuss the development of a potential digital yen. Seiichi Shimizu, the central bank’s director of monetary policy, emphasized the BOJ’s global outlook and the need to draw on trading experience to help it prepare for a potential launch decision. The forum will establish two working groups to facilitate exchanges on future system design, with more coming later this year and next.

Current state of the digital yen

After two years of proof-of-concept (POC) research, the BOJ entered a pilot phase in April to test the technical feasibility of a digital yen, particularly with regard to integration with banks, intermediary networks, and other stakeholders.

The central bank has yet to commit to issuing a digital yen, a decision that could require a referendum.

CBDC Forum and Working Groups

The forum’s participant list comprises a diverse group of some 60 private entities* from across the CBDC ecosystem, including banks, technology companies, and blockchain providers. Some have already worked with the BOJ in previous experiments with the digital yen, but others are somewhat new to the game.

The objective of this first meeting was to update the participants on the central bank’s CBDC initiatives and to establish the first two working groups.

One will focus on the connection between the CBDC system and the infrastructure of financial institutions to deepen the BOJ’s understanding of the technical and operational considerations involved.

The other working group will dive into additional use cases beyond basic payments, such as programmability and the ability to implement an integrated CBDC. You’ll also explore technical aspects such as APIs, SDKs, and a sandbox for testing.

International CBDC Angle

One last note is the BOJ’s emphasis on foreign trends regarding CBDCs. The central bank seems to be closely following developments in the US, UK and China, but seems particularly interested in the digital euro, although this could be related to the fact that the EU has been more prolific in sharing information.

Interestingly, the report only mentions CBDC efforts from other major economies, but not any of the live CBDCs in the Bahamas, Jamaica, Nigeria, and the Eastern Caribbean. Although Japan is an advanced economy and is interested in digitization, unlike other major economies, the use of cash is still very significant.

* The group includes Japan’s major banks and securities firms, the JPX Research Institute (linked to the Tokyo Stock Exchange), major card provider JCB, Sony, and Softbank, and several blockchain firms, including BOOSTRY, CoinCheck, DataChain, Soramitsu, SBI R3, and Startale Labs.