Japan has been raising a lot of red flags over China and the country’s planned release of a state-backed digital currency. In the face of China’s continued efforts towards launch, the former is working up the clock as well. The Asian powerhouse is facing increasing pressure from outside forces and is now reacting by pushing up the timeline on the launch of its digital asset as well.
Moving Up the Timeline
Up until now, Japan was seen as employing a measured but steady approach to developing a digital asset, especially as it recently joined a coalition of nations- including Canada, the United Kingdom, Sweden, and Switzerland- to direct their central banking institutions to research on the possible benefits of launching a Central Bank Digital Currency (CBDC). However, as the report explains, mounting pressure from China and the prospect of Facebook being able to launch its Libra stablecoin have forced the country to fast-track its own digital asset as well.
Earlier today, Kozo Yamamoto, the head of the research committee on finance and banking systems at the Liberal Democratic Party (LDP), explained that these threats are a present possibility, and they essentially mean that Japan will need to launch its digital asset in the next two to three years.
The coalition of central banks had previously set a date in April to conduct discussions on the risks and benefits associated with launching digital versions of their currency. However, given that these deliberations could go any way, the Japanese government doesn’t seem to be interested in knuckle-dragging anymore. It’s time to get its digital asset launched, and the country will do all it can to get that done.
Reaching out to the West for Help
Last week, Bloomberg reported that Norihiro Nakayama, the Vice-Minister for Foreign Affairs, was also courting assistance from the United States in the CBDC effort. Speaking before the country’s top financial lawmakers presented a draft for its digital asset proposal, Nakamaya explained that China’s digital asset could be a risk to potentially everyone, and it is important for there to be a collaborative effort to curtail this.
“We sense the digital yuan is a challenge to the existing global reserve currency system and currency hegemony. Without the U.S., we cannot counter China’s efforts to challenge the existing reserve currency and international settlement system,” he reportedly said. Nakayama also called on the United States Federal Reserve to join the coalition of central banks to develop a global standard for digital currencies moving forward.
As for his reasons, Nakamaya explained that the Dollar remains the global reserve currency, and the United States is also the lone superpower among countries of the world. So, it’s only fitting that Uncle Sam has a seat at the table while a matter as pivotal as this is being mulled.
Whether or not the U.S. will take the step remains to be seen. The country has been rumored to be interested in a CBDC for a while now, although the closest it has gotten is forming a research body on the matter.