Ahead of the Friday release of proposals purported to allow the use of digital currency in Japan, a senior lawmaker in Prime Minister Shinzo Abe’s ruling party, said Japan needs to work closely with the United States to control the potential influence of China’s upcoming digital yuan.
According to a Bloomberg report on Thursday, Japan Vice Minister for foreign affairs, Norihiro Nakayama, one of the lawmakers who drafted the proposals, said that they feel China’s digital currency is a challenge to the existing global reserve currency system and currency hegemony.
He noted that Japan would not be able to curb the threat of China’s soon-to-be-launched digital yuan towards the current international settlement system and reserve currency without close assistance from the US authorities.
While explaining the possible effect of China’s proposed digital currency, Nakayama said:
There are 1.4 billion people in China, so within the one belt, one road digital economic framework, the digital yuan has a high likelihood of becoming the standard within that digital economy.
In a separate interview, the former head of financial settlements at the Bank of Japan, Hiromi Yamaoka, also explained that China is a competitor to Japan. The wide use of digital yuan will only result in the decline of Japan’s economic power.
To this extent, the policymakers in Japan are faced with a heightened concern on what will eventually happen once the digitized yuan is launched, which is why they are speeding up the process to regulate the functionality and impact of digital currencies in the country.
In addition to the collaboration with the U.S, Nakayama hopes that the Bank of Japan would team up with six other central banks, including the Federal Reserve, to intensively study the concepts of digital currencies.