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BY CNA team - October 22, 2018

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BoJ reiterates stance on not issuing CBDCs

BoJ says no CBDCs to be issued
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The Bank of Japan (BoJ) reiterated that no central bank digital currency (CBDC) will be issued as the country still relies on cash.

Reuters says in an Oct 20 report that BoJ deputy governor Masayoshi Amamiya reiterated the central bank’s stance on not issuing CBDCs as it was doubtful whether such a move will enhance monetary policy.

Masayoshi’s doubt rests on the fact that cash is still very much in use and unless a central bank eliminates cash transactions, the public will convert their digital currencies into cash to avoid paying interest.

Some academics believe that central banks could overcome the “zero lower bound”, a situation in which policymakers lose tools to stimulate the economy once interest rates fall to zero, by issuing digital currencies.

“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,” Masayoshi says in a speech during a meeting of academics in Nagoya, Japan.

In theory, digital currencies would allow central banks to more easily charge interest on deposits of households and firms, thereby nudging them to spend rather than hoard money.

Japan has long had interest rates near zero as policymakers struggle to stimulate economic growth by making borrowings cheaper for businesses and consumers.

Masayoshi says getting rid of cash is not a policy option at the BoJ as cash is still widely used while there is also no plan to issue CBDCs for public use.

He noted that cryptocurrencies face “quite high hurdle” to replace sovereign currencies as the main means for transactions.

“This is backed up by the fact that crypto-assets are rarely used for day-to-day payment and settlement, and are mostly a target for speculative investment,” Masayoshi says.

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