Top 3 major Japanese banks – as part of a group of 30 private sector players – will reportedly be jointly working on an experiment with a digital yen.

Specifically, to achieve the target of the experiments, the private banks will reportedly be in charge of the issuance for the currency, despite the potential association of other entities in this process has not entirely been eliminated, per the chair of the new group, Hiromi Yamaoka.

The banking heavyweights of Japan – Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group – have all reportedly invested resources in projects related to individual digital payments systems previously, including digital tokens.

 The idea of the new initiative, however, is reportedly to steer clear from a “silo-type” platform and fragmented digital payments landscape.

“Japan has many digital platforms, none of which are big enough to beat cash payments. […] What we want to do is to create a framework that can make various platforms mutually compatible.” Yamaoka further stated. 

With private banks have joined forces to build a common settlement infrastructure dedicated to the experiment of digital yen, the entities associated reportedly look forward to seeing the collaborative project will pose a decent challenge to compete with the smartphone-based payment settlement services, such as Paypal, a joint venture between SoftBank, Paytm and Yahoo Japan. 

“The fundamental question, and a very tricky one, is how to ensure private deposits and a CBDC [central bank digital currency] co-exist. 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.” Yamaoka remarked regarding what the Bank of Japan and private financial institutions have to pay attention to when it comes to the digital yen issuance.