Bank of Japan Won’t Introduce Digital Yen as Means for Negative Rates

April 13, 2022
Bank of Japan Won’t Introduce Digital Yen as Means for Negative Rates
The Bank of Japan (BOJ) will not introduce a digital yen as a means to achieve negative interest rates.

The Bank of Japan (BOJ) will not introduce a digital yen as a means to achieve negative interest rates, an idea sometimes discussed in academic circles, a senior central bank official said on Wednesday.

In upcoming experiments on issuing a central bank digital currency (CBDC), the BOJ will explore features such as setting a limit on the amount of transactions and holdings for each entity, BOJ Executive Director Shinichi Uchida said in a speech.

The central bank will also examine whether to make the digital yen interest-bearing, though doing so might be unnecessary as the CBDC could then end up being a close substitute for bank deposits, he said.

“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,” Uchida said in a speech.

The BOJ has not decided whether to issue a digital yen but has moved to a second phase experiment from April to prepare for a possible launch in the future.