Since spring 2023, Japan has been making significant efforts in its Central Bank Digital Currency (CBDC) program. The initiative has been driven by two key objectives: testing technical feasibility and leveraging private sector expertise.

A core focus of the pilot program has been to experiment with technical feasibility. This involves not only developing a robust system but also rigorously testing its performance to pinpoint and resolve any technical issue. These ongoing tests are crucial for ensuring the system can handle the demands of a real-world use of digital currency.

Equally important has been the effort to utilize private sector expertise. The CBDC Forum has played a significant role here, discussions within working groups about modern retail payment practices and technologies. A standout feature has been the API Sandbox, which has offered volunteer companies a hands-on opportunity to develop applications and explore potential CBDC use. This practical, “learning-by-doing” approach has proven very valuable, directly contributing to the pilot program’s success.

The pilot program has effectively met its initial expectations, seamlessly integrating insights gained from system development, practical experimentation, and the collaborative environment of the CBDC Forum.

Japan has been actively participating in the Relevant Ministries and BOJ Liaison Meeting on CBDC. This collaborative forum has been vital for sharing valuable insights from the pilot program, including solutions for privacy concerns and improvements in system performance. The Liaison Meeting recently released its second report, signaling continued progress in this critical area.

Despite Japan’s continued high banknote circulation, the possibility of a future decline in cash use is a reality that cannot be ignored. This necessitates a proactive approach to ensure that Japan’s retail payment system remains convenient, efficient, universally accessible, safe, and robust in an increasingly digital society.

The Bank of Japan’s  stance remains clear: “There are no plans to issue a CBDC at this time.” However, as technology relentlessly advances and society becomes more digitalized, maintaining the status quo for payment and settlement systems is simply not an option. The commitment to continuously improve their safety and efficiency is unwavering.

Japan will continue to deepen discussions on shaping the ideal payment system for a digital society, recognizing that ongoing cooperation with key players in the payments industry is paramount.

What about the rest of the world?

The United States issued an Executive Order in January 2025, clarifying its position against federal agencies issuing a CBDC. Instead, the U.S. is prioritizing stable-coins as a catalyst for financial innovation.

In Europe, the European Central Bank is actively developing regulatory frameworks for a digital euro. They’re also accelerating their efforts by creating an innovation platform to foster collaboration with various financial institutions.

A 2024 survey by the Atlantic Council highlighted a significant global trend where 134 countries are currently exploring some form of CBDC implementation. While the ultimate decision to issue a CBDC isn’t certain for all, there’s a growing worldwide recognition of the importance of ensuring universally accepted payment methods. This awareness is particularly heightened as cash circulation declines, leading some countries to even mandate cash acceptance.