The Executive Director of the Bank of Japan has announced that it will not introduce a digital yen that helps enforce negative interest rates. Pundits point out that physical cash is more attractive in a negative interest rate situation.
The Bank of Japan has said that its Central Bank Digital Currency , the digital yen, will not be used to help attain negative interest rates.
“While the idea of using such a functionality as a means to achieve a negative interest rate is sometimes discussed in academia, the Bank will not introduce CBDC on this ground.” Echoing this sentiment was former head of the BoJ’s financial settlement department Hiromi Yamaoka, who warned earlier this year that CBDCs could potentially destroy the Japanese economy. While Yamaoka agreed with the idea of digitizing payment methods, he did not support the idea of using a CBDC for it.that the difference between a CBDC and cash would be highlighted if interest rates fell below zero.
The bank is considering imposing a limit on the transaction amount of each individual or entity for the duration of the pilot, and is also contemplating whether or not to make the digital yen an interest-bearing asset.its three-phase trial outline for its central bank digital currency in October 2020. The first two phases of the trial are focused on testing the proofs-of-concept while the third phase would see a pilot currency be launched.in April 2021 and finished on March 22 this year.
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