• Bloomberg


Cash is still king in Japan, and that means the central bank doesn’t see a need to mint a digital currency for now, according to the head of the FinTech Center at the Bank of Japan.

“We aren’t at the stage of considering issuing a digital currency because there is no demand,” said Yuko Kawai, the head of the BOJ division, in an interview last week. “To begin with, do we really need a digital currency in the nation where cashless living isn’t making much progress?”

Kawai speaks from experience — since taking over the job about a year ago, she’s tried to stop using cash in her personal life. But while life is “much easier” without needing an ATM so often, there are many things that still require physical money. If you want to split the cost of dinner with friends, or pay for a taxi in rural Japan, she said, you need cash.

That love of cash is clear from the amount of notes and coins sloshing around in the country — more than any other major economy. The value of physical currency in circulation was equivalent to 20 percent of Japan’s economy in 2016 — the highest among major nations — according to a report by the Bank for International Settlements last year. Sweden had the lowest ratio, at 1.4 percent. Its central bank is considering issuing a digital currency.

In Japan credit, debit cards and e-money were used for less than 20 percent of transactions in 2015, according to a Japan Credit Association report. And as cash is so widely used, there’s little incentive for people to switch.

“The biggest hurdle is that others aren’t feeling inconvenienced so they don’t download an app,” Kawai, 53, said. “Cash has been in demand so far and it’s our mandate to make it available” even if it has costs for the bank.

The situation could change as the population shrinks further because there will be less demand for bank branches and ATMs, and younger generations are used to using cashless payment methods such as Line Pay or Amazon gift cards, Kawai said.

Even so, it’s hard for bitcoin to become a means of settlement now as its technology is under development, she said. In addition, bitcoin has become a commodity for speculative trading, Kawai said.

The theft last week of nearly $500 million in cryptocurrency from Tokyo-based exchange Coincheck Inc. is likely to add to the BOJ’s caution on the subject. Although the company has promised to reimburse all losses, the incident adds to a long list of thefts from cryptocurrency exchanges and wallets, stretching back to the robbery of Tokyo-based Mt. Gox in 2014.

Kawai’s comments add to BOJ Gov. Haruhiko Kuroda’s remarks last year that the central bank doesn’t have a concrete plan to introduce its own digital currency, and indicate there is little chance that this will change anytime soon.

One potential risk with that position is that the use of fintech may advance in other nations, and spending by foreign tourists may drop if Japan fails to provide convenient services, Kawai said. “If we keep our status quo, consumer spending by foreigners will go down.”

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