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Bank of Japan (BOJ) is launching a pilot program to test the use of a digital yen.
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BOJ has been testing for two years to decide whether to issue a digital yen.
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The pilot program will involve simulated transactions with private entities.
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BOJ's aim is to prepare to launch a digital yen if the government decides so.
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BOJ joins a growing list of central banks developing CBDCs.
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BOJ's digital yen would be a legal tender.
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BOJ has been cautious about the risks of CBDCs on the financial system.
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The use of CBDCs could increase financial inclusion and reduce transaction costs.
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BOJ's pilot program will last for a year.
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The launch of a digital yen could still take years to come to fruition.