TOKYO: Bank of Japan will start a pilot program in April this year to test the use of a digital YEN, its central bank said on Friday.  Bank of Japan is joining a growing number of countries seeking to catch up to front-runner China in launching a central bank digital currency.

The widely expected action comes after two years of tests the Bank of Japan (BOJ) has run to determine whether to issue a central bank digital currency (CBDC). Also, it occurs before Haruhiko Kuroda, the current BOJ leader, passes the gavel to scholar Kazuo Ueda. April marks the end of Kuroda's second five-year term.

In his opening remarks at the central bank's meeting with private-sector leaders, BOJ Executive Director Shinichi Uchida stated, "Our aim is that the pilot programme would lead to improved designs through dialogue with private enterprises."

According to Uchida, as part of the pilot initiative, the BOJ would replicate transactions with private financial institutions in a testing setting. According to him, it has no plans to carry out actual transactions between retailers and customers. The scheme will enable the BOJ be ready in the event that the government decides to issue a digital yen.

If a CBDC were to be issued in the future, exploring its framework in such a phased manner and engaging in highly transparent communication with the private sector are necessary steps to take for adoption in society," said Uchida, who has been selected by the government to serve as the next deputy governor of the BOJ.

Japan and other developed nations are attempting to overtake China, which is leading the global race to create CBDCs and has accelerated the development of pilot programmes for retail payments.

The American Federal Reserve has also been investigating how to introduce Fedcoin, a totally digital dollar. According to Fed officials, elected officials would need to support the launch of any such asset.

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