Japan joins a growing list of countries exploring the possibility of adopting a digital currency: the country’s central bank, the Bank of Japan, has announced that it will launch a pilot project to test a “digital yen” in April.

The move comes more than two years after the Bank of Japan took its first step in this area in October 2020, launching a central bank digital currency (CBDC) proof-of-concept experiment.

In April 2021, the Bank of Japan launched the first phase of this experiment to test core CBDC transactions, including issuance, payouts, and transfers. A year later, Japan moved to the second phase, which is expected to be completed in March this year, to carry out additional CBCD functions.

The pilot program, which will start in April, aims to “test the technical feasibility that is not fully covered by the cooperation agreement” and also “test the technical feasibility not fully covered by the PoCs,” and “to utilize the skill and insights of private businesses in terms of technology and operation for designing a CBDC ecosystem in the possible event of social implementation,” said the executive director of the Bank Uchida Shinichi of Japan.

Transactions between retailers and consumers do not yet take place (during the pilot phase, only simulated transactions will take place), the Central Bank said. Uchida added that Japan will hold a CBDC forum and invite private businesses involved in retail payments or related technologies to participate in the discussion.

Last November, the Bank of Japan unveiled plans for a digital yen experiment in which it will partner with three local banks and other unnamed regional banks to experiment with CBDC and test its viability in areas with limited access to the Internet and during natural disasters, reports local media Nikkei. The country’s top three banks mentioned in the report are Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group.

As of last December, 114 countries were actively considering CBDC implementation, compared to 35 countries in May 2020, according to Atlantic Council. This result was made possible by a partnership in October between the Bank for International Settlements (BIS) and four central banks — the Hong Kong Monetary Authority, the Bank of Thailand, the People’s Bank of China, and the Central Bank of the United Arab Emirates — to pilot cross-border currency transactions.

In addition to China, Hong Kong, and Thailand, more than 20 countries, including Australia, India, Japan, South Korea, Singapore, Brazil, Malaysia, South Africa, and Ghana, will continue or start a pilot phase in 2023.

As reported, Japan will decide on issuing its CBDC in 2026.