Japanese lawmakers have drafted digital currency proposals as part of an effort to begin preparation for a possible Chinese digital yuan, Bloomberg reported this week. The proposal could lay the groundwork for the creation of Japan’s own central bank digital currency if and when the digital yuan is launched.
According to reports, the Japanese are concerned that China’s digital currency project is part of the communist nation’s plan to directly challenge the current reserve currency system. The fear is that China’s large population and economy could enable the digital yuan to gain preeminence in the emerging digital economy if nations like Japan and the United States don’t effectively respond.
Vice Minister for foreign affairs Norihiro Nakayama is convinced that any plan to counter China must involve cooperation from the United States:
“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.”
Under the proposed plan, Bank of Japan officials would work with the U.S. Federal Reserve and several other central banks to explore digital currency technology’s potential benefits.