By Leika Kihara and Takahiko Wada

TOKYO, Oct 12 (Reuters)Japan must swiftly revise laws to allow the central bank to issue a digital currency, a move that could provide a chance to reform the Bank of Japan’s existing mandates and enshrine its inflation target, a senior ruling party official said on Monday.

Kozo Yamamoto, head of the Liberal Democratic Party’s (LDP) council on financial affairs, said the BOJ risked being overtaken by private players who could launch their own digital currencies that could undermine the yen.

“If something too convenient pops up from the private sector, people might start to doubt whether they need yen as a currency unit. We must prevent this from happening,” he said. “This is fundamentally about protecting Japan’s currency sovereignty.

Yamamoto said he would prod the government and relevant agencies to speed up efforts to draft a revised BOJ law and other necessary legislation for issuing central bank digital currencies (CBDC).

However, more broadly, Yamamoto has been a vocal advocate of making changes to the BOJ law, which sets out the central bank’s mandates.

Revising the law to include digital currencies would also present a good opportunity to make other changes such as adding an inflation target and job creation to the mandates, much like the U.S. Federal Reserve, he added.

“The new law should also clarify that 2% inflation is the BOJ’s policy target,” he told Reuters.

The BOJ does currently set 2% as its inflation target, introduced in 2013. But the target is not stipulated under the BOJ law, which says only that its role is to ensure Japan’s price moves and financial system are stable.

Central banks globally have been reviewing their strategic goals, with the European Central Bank widely expected to follow in the footsteps

FILE PHOTO: A man wearing a protective mask stands in front of the headquarters of Bank of Japan amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020.REUTERS/Kim Kyung-Hoon

TOKYO (Reuters) – Some Bank of Japan board members called for a review of the central bank’s policy strategy as the economic shock caused by the coronavirus pandemic pushes inflation further away from its target, a summary of opinions from a September meeting showed.

Those views underline the increasingly tough position the BOJ finds itself in, as inflation had failed to gain momentum even before the coronavirus ravaged Japan’s economy.

A few of the board members said the central bank may need to find a new approach to fire up inflation toward its 2% target, given the pandemic’s sweeping impact on companies and households.

“As economic developments change rapidly, it’s becoming hard to foresee inflation reaching our target. It’s thus necessary to conduct again a comprehensive examination of our strategy for achieving the price goal,” one member said.

“We may need to debate the appropriate monetary policy path from the perspective of how to balance the need to contain the pandemic and keep the economy alive,” according to another opinion shown in the summary.

Some others said the BOJ must act “promptly” and in close cooperation with the government if the pandemic’s scars deepen, according to the summary released on Tuesday.

The BOJ kept policy steady in September and offered a slightly more upbeat view of the economy than in July, suggesting that no immediate expansion of stimulus was needed.

But BOJ Governor Haruhiko Kuroda has said the central bank would work closely with new Prime Minister Yoshihide Suga’s administration to shield the economy from the broadening fallout of the pandemic, including by loosening policy further.

The BOJ releases