Japanese lawmakers have been working on a proposal to issue the country's own digital currency, Reuters reported citing parliamentarians. The move signals the alarm the country is feeling about Facebook's Libra and China's move to create digital yuan. A group of ruling party lawmakers are moving ahead with the plan by the creation of the proposal.

Norihiro Nakayama told Reuters that this could be a joint initiative between the government and the private sector. The parliamentary vice minister for foreign affairs believes that this could put Japan in tune with the global changes in financial technology.

"The first step would be to look into the idea of issuing a digital yen," said Nakayama, a key member of the group comprised of about 70 Liberal Democratic Party lawmakers.

"China is moving toward issuing digital yuan, so we'd like to propose measures to counter such attempts," he said on Thursday.

Taro Aso, Japanese Finance minister
Taro Aso, Japanese Finance minister Wikimedia Commons/内閣官房内閣広報室

The proposal will be submitted early next month

The group, led by party heavyweight and former economy minister Akira Amari, plans to submit its proposal to the government as early as next month, Nakayama said.

While Japan is unlikely to issue digital currencies any time soon due to technical and legal hurdles, the move comes in the wake of a decision by the Bank of Japan to join six other central banks to share expertise on doing so in the future.

In a sign of increased attention on digital currencies in political circles, Prime Minister Shinzo Abe told parliament on Friday the government will work with the BOJ in studying digital currencies and find ways to enhance the yen's convenience as a settlement means.

Facebook's launch of Libra cryptocurrency

Facebook's push to launch its Libra cryptocurrency has prodded central banks to quicken the pace at which they look at issuing digital currencies. Of the major central banks, China's has emerged as the frontrunner in the drive to create its own digitized money, though details of its project are still scarce.

Some Japanese lawmakers have voiced concern over Beijing's move as an attempt to expand the yuan's use as a settlement currency in emerging economies. Finance Minister Taro Aso said earlier this month that it would be a "very serious problem" if digital yuan becomes a popular means for international setttlement, as Japan settles transactions mostly in dollars.

Former BOJ board member Takahide Kiuchi, however, said China and Japan have different reasons to consider issuing digital currencies. For China, the motivation is to enhance the yuan's clout in the global community; for Japan, it would be to change the country's cash-loving culture, he said.

"The BOJ probably won't want to do anything that would stifle private-sector innovation. The best way could be to issue a hybrid-type digital currency that is operated and issued by private firms, with the central bank's involvement," he said.

(With inputs from agencies)