BOJ Deputy Governor Rules Out Japanese CBDCs As Long As Cash is Still Popular

BOJ Deputy Governor Rules Out Japanese CBDCs As Long As Cash is Still Popular

The Deputy Governor of the Bank of Japan, Masayoshi Amamiya, has previously spoken negatively on the subject of central bank-issued digital currencies – so-called CBDCs – and in April of this year, he was quoted as saying that they could potentially destabilize the entire existing financial system.

Furthermore, the Deputy Governor has this weekend once again made his opposition to CBDCs known in a speech to academics in Nagoya, Japan.

According to an article in the New York Times, Amamiya was cited as noting it was ”doubtful whether central banks could enhance the effectiveness of their monetary policies by issuing digital currencies”.

This comes as several researchers and experts have pointed to CBDCs as a way for central banks to retain the tools for stimulating the economy even if interest rates reach zero.

More specifically, this problem is sometimes referred to as the ”zero lower bound”, and the reasoning behind the aforementioned ”CBDC solution” it is that banks could control the interest on central bank-issued digital currencies.

In effect, this could allow banks to charge interest on consumers’ and firms’ CBDC deposits, thereby incentivizing them to spend money rather than to save it – potentially boosting the economy in what central banks would deem ”times of need”.

Nevertheless, it would appear Amamiya is wholly opposed to this idea, and he reportedly said that the only instance in which charging interest on digital currencies would be a viable solution would be if central banks would eliminate physical currencies altogether.

He reasons that if consumers can still access cash, charging interest on digital currencies would only prompt consumers to convert their CBDCs to traditional legal tender, thereby avoiding the need to pay interest.

”In order for central banks to overcome the zero lower bound on nominal interest rates, they would need to get rid of cash from society,” Amamiya reported said, before adding that it was ”not an option” for Japan’s central bank to get rid of cash – at least not at the moment.

Moreover, Amamiya stated that the Bank of Japan does not have any plans on issuing digital currencies that the public could use as a means of payment or settlement.

He also noted that cryptocurrencies would need to clear ”quite a high hurdle” before they could take the international limelight and surpass fiat currencies as the preferred global means of payment.

”This is backed […] by the fact that crypto-assets are rarely used for day-to-day payment and settlement, and are mostly a target for speculative investment,” Amamiya argued.

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