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epa03613196 A Japanese national flag is flapping at the Bank of Japan (BOJ) in Tokyo, Japan, 07 March 2013. Japan's central bank on 07 March said it would pursue its policy of aggressive monetary easing and near-zero base interest rates as the economy showed signs of improvement. The announcement came as bank Governor Masaaki Shirakawa was to step down 19 March along with two deputies and be replaced by Haruhika Kuroda, former president of the Asian Development Bank and a long-standing advocate of aggressive monetary easing. EPA/KIMIMASA MAYAMA

BOJ deputy governor doubts digital currency will enhance monetary policy

TOKYO (Reuters) – Bank of Japan Deputy Governor Masayoshi Amamiya said on Saturday it was doubtful whether central banks could enhance the effectiveness of their monetary policies by issuing digital currencies.

Some academics have said central banks could overcome the “zero lower bound” – a situation in which they lose tools to stimulate the economy once interest rates fall to zero – by issuing digital currencies.

Amamiya countered the idea, saying that charging interest on digital currencies would only work if central banks eliminate cash from society. Otherwise, the public will simply convert digital currencies into cash to avoid paying interest, he said.

“In order for central banks to overcome the zero lower bound on nominal interest rates, they would need to get rid of cash from society,” he said in a speech at an meeting of academics in Nagoya, central Japan.

“Getting rid of cash now is not an option for us as a central bank,” as cash is still widely used in Japan, Amamiya said, according to a text of the speech posted on the BOJ’s website.

Amamiya said the BOJ has no plan to issue digital currencies that can be widely used by the public for settlement and payment purposes.

Regulators across the world have voiced concern about the growing presence of crypto-currencies, which are not backed by any central bank because of their volatility.

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Amamiya said there was “quite a high hurdle” for crypto-assets to overcome sovereign currencies – or currencies issued and backed by central banks – as the main means for payment and settlement.

“This is backed up by the fact that crypto-assets are rarely used for day-to-day payment and settlement, and are mostly a target for speculative investment,” he said.

Oliver Smith


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