Japan is rapidly moving toward a cashless society, prompting the Bank of Japan (BOJ) to call for innovation in payment systems. Traditionally, Japan has been known for its strong preference for cash.
However, cashless payments now make up 42.8% of transactions in 2024, a sharp rise from just 13.2% in 2010. This surpasses the government’s target of 40%, reached a year ahead of schedule.
Despite Japan’s slow start in adopting payment technology, the growing use of digital payments is pushing policymakers to prepare for changes in how people pay and settle transactions.
One key focus is the potential introduction of a central bank digital currency (CBDC), or digital yen. The BOJ started a pilot program for a CBDC in 2023 and is working with private companies and the government to design its framework.
BOJ Executive Director Kazushige Kamiyama said that although cash use remains high, it could drop significantly as digital payment options expand. He emphasized the need for Japan’s payment system to be convenient, efficient, safe, and accessible to everyone.
Deputy Governor Shinichi Uchida described a CBDC as a possible “critical piece of infrastructure” for Japan’s future payment systems. However, he noted that cash demand is unlikely to vanish soon.
Uchida also warned that if the BOJ fails to maintain price stability, public trust in the yen could weaken, potentially allowing other payment methods like cryptocurrencies to take over.
Globally, CBDCs are gaining attention amid shifts in currency use. The U.S. banned the Federal Reserve from issuing a digital dollar earlier this year, boosting interest in cryptocurrencies and stablecoins.
The European Central Bank is exploring a digital euro to reduce reliance on U.S.-based payment networks. Meanwhile, China is advancing its digital yuan, with transactions tripling in one year as it seeks to expand the yuan’s global role.
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