Attributes needed for Japan's central bank digital currency

The issuance of central bank digital currency became a real policy issue after the announcement of Facebook's Libra. Which types of product attributes should a central bank digital currency have to be widely accepted? We answer this question by analyzing the consumers' acceptance of hypothetical payment instruments. We used Japanese data from the 2019 Financial Literacy Survey to estimate a model of consumers' ranking of the frequency of the use of five payment instruments. The estimates of the model showed that the respondents to the survey value payment instruments with shorter transaction times and mobile payment instruments. Based on the estimates of the model, we conducted counterfactual simulations for the introduction of the hypothetical mobile version of noncash payment methods that required a shorter transaction time. We found that these hypothetical products would be the most frequently used payment methods on average; however, respondents with old, low-income, and low-financial asset holdings, who were likely to be heavy cash users, would use them less frequently. The results suggest that if the Bank of Japan wanted to issue a central bank digital currency that would be used almost every day as a replacement for cash, policy tools should be utilized to encourage the use of it by these groups as well.