Concerned about China’s Digital Yuan, Japan requires cooperation from the US to strengthen digital currency research

By Selena 02/6/20 6:56 PM

It appears that national governments are trying to issue their digital currencies after witnessing China’s admirable efforts. And as revealed by a senior lawmaker in Prime Minister Shinzo Abe’s ruling party, Japan is asking for closer cooperation with the U.S. to limit the potential impact of digital currency under the Chinese plan.

Japan and the United States shake hands with the digital currency research plan

Referring to the proposals to pave the way for the use of digital money in Japan, Deputy Minister of Foreign Affairs, Norihiro Nakayama, said:

“I hope the Federal Reserve will work with six other central banks, including the Bank of Japan, to research digital currencies.”

Norihiro Nakayama, Deputy Minister of Foreign Affairs

It seems that central banks are working together to study the use of cases of digital currencies.

Nakayama said:

“We feel the digital currency is a challenge to the global reserve currency system and the current currency hegemony. Without the U.S., we cannot resist Chinese efforts. China is challenging the existing reserve currency and international payment system.”

It seems that policymakers in Japan are showing increasing concern about the upcoming impact of the digitized yuan, which is expected to launch later this year. China’s plans and Facebook’s efforts to launch Libra stablecoins have spurred central banks around the world to speed up the launch of their digital currencies.

Nakayama said:

“There are about 1.4 billion people in China. Therefore, digital yuan is highly likely to become the standard in the digital economy.”

Why is China rushing to issue its digital currency?

China’s significant presence in Africa is a huge concern. Therefore, Japan needs to ensure that it has the technological know-how and the capacity to deal with the challenge of the digital yuan before mass-circulation there.

Hiromi Yamaoka, former director of financial settlements at BOJ, also shared concerns about Japan about China’s potential to increase the yuan’s potential by digitizing it.

China is a significant competitor. If the renminbi is used more widely than YEN, this will lead to a decline in Japan’s economic power and influence in the medium and long term. Libra is also a catalyst behind the moves of central banks to address the ability of their digital currencies. A significant concern for Libra is that it could make the central bank monetary policy less efficient.

Lael Brainard, Federal Reserve Governor with the Stanford University’s business school dean Jonathan Levin in Palo Alto. Source: Reuters

As AZCoin News reported, the Fed is also studying the potential for U.S. digital currencies. The Federal Reserve’s governor, Lael Brainard, said the Fed is studying the feasibility of digital currency.