By Leika Kihara

TOKYO, Reuters – Japan’s newly elected political leaders are asking the financial bureaucrats of the country to intensify efforts towards issuing a digital currency. They point out China’s faster progress as a possible threat to the global economic order.

A government increase in staff has been made to examine the technical and legal aspects of issuing digital currencies (CBDC) by central banks. These digital versions of currency exist.

Analysts say that although the attention from the politicians has not translated into direct investments, it will likely keep the Bank of Japan under pressure to abandon its baby-step, cautious approach to issuing a digital currency.

“We need to think about the consequences for Japan’s security if countries continue on CBDC,” stated Takayuki Kbayashi, who is a minister responsible for economic security. This new position was created by Prime Minister Fumio Shimada.

He stated that Japan must accelerate its processes so that it can issue digital yens at any moment.

China is a global leader and has conducted tests in key cities to test the possibility of an electronic yuan. Japan is among the advanced G7 countries that have taken a slower pace than other nations.

Although the BOJ has only begun its first phase of this experiment, it says that no plans are currently in place to issue digital yen. The pilot programmes, if they exist, will not be held until at least 2023.

This lukewarm attitude may come under scrutiny as Kishida made economic security a priority and turned questions about CBDC into national security.

Although G7 central banks agree that China must be countered on privacy issues, Japan’s case stands out because of the concern expressed by lawmakers about Japan’s assertive neighbor.

Many influential members of the ruling party see China’s advancements on CBDC in China as a risk to the dollar’s global status as a reserve currency as well as the financial dominance Washington, Japan’s largest ally.

According to Reuters, a close aide of Kishida said that Japan should “work closely” with the United States in order to combat any attempts to undermine the dollar’s status as a reserve currency. He added that the BOJ had been coordinating with finance ministries to speed up the process for issuing a digital yen.

For speeding up CBDC plans, opposition parties also submitted their election platforms.

Officials from BOJ claim that China’s proposal won’t have any impact on their CBDC trials. This is because the main purpose of issuing the digital yen to facilitate efficient payments and settlements to the public.

The BOJ could be more affected than China’s plan if its European or American counterparts quickly announce plans for issuing CBDCs. Sources familiar with the BOJ’s thinking say this.

As Kishida’s government lays out its economic security plans and China promotes the digital yuan in Beijing, debates over issuing digital yens could intensify next year.

“It is clear that Kishida and his administration are eager to issue a digital currency,” stated Takahide Kiuchi (ex-BOJ member) who is an economist at Japan’s Nomura Research Institute.

“If China issues a digital Yuan and Europe’s central banks announce plans to issue digital euros next year, it will impact Japan greatly and put pressure on Japan.”