The Bank of Japan (BOJ) will not introduce a digital yen as a means to achieve negative interest rates, an idea sometimes discussed in academic circles, a senior central bank official said on Wednesday.

“The bank will not introduce CBDC on this ground,” BOJ Executive Director Shinichi Uchida, in charge of the central bank's experiments for digital money, said in a speech to a committee on Wednesday. “It is unlikely that such a motivation would be supported by the general public. Furthermore, such a remuneration functionality would be operationally unrealistic while cash still exists.”

The remarks by Uchida, also a key architect of monetary policy, are likely to cool any speculation that the central bank may use digital money to bolster the impact of its negative rates for a distant, stable inflation target.

Some BOJ watchers say a digital currency could open the door to more effective stimulus tools for a bank that has used almost everything available.

The central bank began the second phase of its proof of concept studies for digital money earlier this month. It plans to examine features to set limits on the amount of transactions and holdings of digital currency as safeguards against an unpredictable shift of deposits away from banks, Uchida said, in line with moves by other major central banks including the European Central Bank.

Uchida reiterated that the bank hasn't decided on issuing a digital currency and that it won't be the one to make the call. The decision will be made by the public, he said, adding that the BOJ wanted to be prepared for when it's needed. -Bloomberg L.P.