payments users and merchants increases up to a certain scale, the use of cashless payments could then expand sharply. let's take a look at the case of south korea. in the wake of the asian currency crisis in the late 1990s, south korea's government promoted cashless payments as a part of economic policy package. it introduced a system of a deduction of 20 percent of annual credit card payments from taxable income, and obliged merchants to accept credit cards. these measures turned the tide, and the move toward a cashless society accelerated. in japan as well, the government plans to introduce loyalty rewards for using cashless payment instruments with the scheduled consumption tax hike in october 2019. these measures may provide a boost toward the cashless society in japan. iii. central bank digital currency and private digital currency the phenomenon of the demand for cash being surprisingly persistent and the ratio of cash in circulation to nominal gdp continuing to increase has been observed not only in japan but in many countries. 1 nonetheless, cashless payments will likely increase in numerous countries in the long run. against this background, there has been a growing interest in the digitization of currencies issued by central banks, or central bank money. morten l. bech et al., " payments are a - changin'but cash still rules, " bis quarterly review, march 2018. 1. issuance forms of central bank digital currency there are two main variants of cbdc. one variant is electronic central bank money, which offers access to a limited group of users such as banks, among whom it is used for funds settlement. this variant, called " wholesale cbdc, " adopts new information technologies such as distributed ledger technology ( dlt ) in settlements using central bank deposits, or central bank liabilities which have been digitized. the other variant is electronic central bank money which is assumed to be widely accessible, including for individuals and firms. this variant is called " general purpose cbdc. " from now on, i will use the term cbdc to refer to the general purpose variant. a general purpose cbdc is a substitute for cash ( banknotes and coins ), and two issuing forms are possible ( figure 5 ). one is an " account - based " cbdc, in which individuals and firms open an account at a central bank and use it to make transfers between accounts. this scheme is fundamentally the same as transfers between accounts held at private banks. the difference lies in whether the accounts are held

haruhiko kuroda : the bank's semiannual report on currency and monetary control statement by mr haruhiko kuroda, governor of the bank of japan, before the committee on financial affairs, house of councillors, tokyo, 9 may 2019. * * * i. economic and financial developments in japan i will first explain economic and financial developments in japan. japan ’ s economy has been on a moderate expanding trend, although exports and production have been affected by the slowdown in overseas economies. looking at this in more detail, japan ’ s exports and production have shown some weakness recently, mainly in terms of capital goods and it - related goods specific to china. however, domestic demand has continued to be firm. with corporate profits having stayed at favorable levels on the whole, albeit with some weakness observed in part, business fixed investment has continued on an increasing trend. private consumption also has been increasing moderately, albeit with fluctuations, against the background of steady improvement in the employment and income situation. going forward, japan ’ s economy is likely to continue on a moderate expanding trend, despite being affected by the slowdown in overseas economies for the time being. risks to the outlook are skewed to the downside, particularly regarding developments in overseas economies, including the consequences of protectionist moves, developments in the chinese economy, and the degree of progress in global adjustments in it - related goods. on the price front, the year - on - year rate of change in the consumer price index ( cpi ) has been positive but has continued to show relatively weak developments compared to the economic expansion and the labor market tightening. recently, however, firms increasingly have reflected rises in prices of raw materials and personnel expenses in their prices. as such moves continue to spread with the output gap remaining positive, people ’ s inflation expectations are projected to rise gradually. the momentum toward achieving the price stability target is maintained, and the year - on - year rate of change in the cpi is likely to increase gradually toward 2 percent. ii. conduct of monetary policy next, i will explain the bank ’ s conduct of monetary policy. the bank has been conducting powerful monetary easing under the framework of “ quantitative and qualitative monetary easing ( qqe ) with yield curve control. ” in terms of yield curve control, with a view to facilitating the formation of the yield curve that is considered most appropriate for achieving the price stability target, the bank has conducted purchases of japanese government bonds ( jgbs ) under