Connect with us

To The Moon

Fintech Won’t Intimidate Central Banks in Japan

News

Fintech Won’t Intimidate Central Banks in Japan

Senior Bank of Japan (BOJ) official announced all virtual currencies will not overthrow hard money printed by central banks any time soon, particularly in countries such as Japan with a solid, established financial business.  Hiromi Yamaoka, head of the BOJ’s payment and settlement systems department explains, the need for central banks to maintain public trust in their policies has increased as the evolution of financial technology or fintech gives the public an alternative to using cash.

The BOJ established a section in charge of fintech to offer guidance to banks seeking new business opportunities.  The Bank of Canada is experimenting with a payments system based on the technology behind crypto currencies.  Yamaoka believes that while there was no plan for the BOJ to engage in a similar experiment, the increasing presence of digital currency was among topics keenly studied by the financial institution.  Fintech is an area with potential to revitalize Japan’s economy,” he said. That’s why policymakers want to work hand in hand with the private-sector.”  Central banks of advanced nations, including the BOJ, have been printing money aggressively to reflate their economies with little success. While their hope is to generate inflation, critics say the move could erode the value of their currencies and damage their credibility.

Fintech, which involves new technologies to make financial services more efficient, has been under the global spotlight because of its promise or warn  to rattle traditional financial activity.  It boosted prominence in the United States partly on public distrust over traditional banking after the collapse of Lehman Brothers in 2008 led to bail-out of banks with taxpayers’ money.  In Japan, public trust over the banking sector did not waver as it was relatively unharmed by the Lehman crisis, which meant fintech start-ups were better off cooperating rather than challenging traditional banks..

While Japanese banks can use fintech to cut costs, the merit of maintaining huge financial infrastructure could diminish as the use of new technology expands.  One of the trends of fintech is the possibility of providing financial services by smart phones without any ‘brick and stone’ infrastructure. In that trend, the heavy infrastructure of ATMs and branches means it’s difficult to gain a competitive benefit.  A laggard in embracing the fintech revolution, Japan has moved to ease investment restrictions that could free up the flow of capital in an economy sitting on an estimated $9 trillion in individuals’ cash deposits.  Fintech has also drawn the attention of central banks all over the globe as something that could change settlement systems and even threaten their restriction of money printing.

 

Comments

More in News

To Top