Page 2 of 2

In contrast, Japan's supply-side drive has been diverse and encouraged.

Concurrent to the BoJ’s digital yen, over 30 companies, including three of the country’s largest lenders, are involved in their own private digital currency project.

On the other hand, some private sector participants welcome the BoJ’s electronic money with Oki Matsumoto, head of Japan's Monex which runs one of Japan’s largest crypto exchanges, saying last week that CBDCs would, in fact, boost crypto demand because of easier convertibility, according to a «Reuters» report. 

While Japan also has its slew of big tech challengers such as Softbank, the digital payment market remains relatively small and fragmented compared to other large markets. 

Paying Dividends

The nation's positioning is already paying dividends.

Ripple Lab, which developed the XRP payment protocol, reportedly named Japan as the leading candidate for its headquarter relocation due to regulatory concerns in the U.S. Another American crypto giant,

Coinbase, is on a hiring spree with Tokyo-based roles across IT, data, finance and accounting, legal, marketing and communications, customer experience and more.

Downside Risks

In many ways, Japan’s diversified drive could be motivated by its limited digital payment penetration in a large economy that continues to have a strong preference for physical cash. The U.S. and China, by comparison, are more concerned about controlling the emerging demand for digital payments rather than promoting it. 

But this, as a former BoJ executive noted, has its own associated risk, albeit one that is not a competitive threat. According to Hiromi Yamaoka, the issuance of a digital yen has the potential to trigger huge deposit outflows at privately owned banks due to the lack of a common settlement infrastructure. 

«The fundamental question, and a very tricky one, is how to ensure private deposits and a CBDC co-exist,» he said in another «Reuters» report. «You don’t want money rushing out of private deposits. On the other hand, there’s no point issuing a CBDC if it isn’t used widely.»