Japan Aims to Curb the Potential Influence of China’s Digital Currency With Help From the US

Aiming to curb the potential influence of China’s digital currency electronic payment, its nation’s central bank digital currency, Japan is looking to release its own digital currency proposals today. According to Prime Minister Shinzo Abe, the country is also requesting support from the US Federal Reserve.  

Norihiro Nakayama, the Vice-Minister for Foreign Affairs in Japan and the top member of the Liberal Democratic Party, the ruling party that drafted the proposals, said that he wishes the “Federal Reserve would partner with six other central banks including the Bank of Japan in studying digital currencies.” 

As the US Dollar remains the world’s dominant currency, Nakayama added, “We sense the digital yuan is a challenge to the existing global reserve currency system and currency hegemony. Without the US, we cannot counter China’s efforts to challenge the existing reserve currency and international settlement system.” 

Nakayama predicted that with the Belt and Road initiative, which includes a digital economic framework, the digital yuan is highly likely to become the standard of the digital economy.  

The former head of financial settlements at the Bank of Japan, Hiromi Yamaoka said an interview that  China is the competitor; “if the yuan is used more widely than the yen, it will lead to a decline in Japan’s economic power and influence in the mid to long term.” 

This update came in just less than a day after the Federal Reserve Governor Lael Brainard said the reserve is looking to research on central bank digital currencies. He further suggested that the Federal Reserve is changing its attitude towards the possibility of a Fed digital currency.  

Image via Shutterstock