A consortium of banks, led by Mizuho Financial Group and Japan Post Bank, has won support from the country’s central bank and financial regulator to launch the J Coin.

China's Alibaba plans to introduce their own digital currency in time for the 2020 Tokyo Olympics. Japan wants to counter China by launching its own digital currency.

The digital currency will be pegged to yen and can be used for paying for goods and transferring money using smartphones by scanning QR codes. The service will be given for free, however the banks would benefit by collecting consumer spending data.

“I think this electronic money is quite ahead of [credit and debit] cards, because when you use the cards the shops pay a certain fee,” Yasuhiro Sato, president and chief executive officer of Mizuho Financial Group told Financial Times.

Earlier this year, bitcoin was legalized as a legal payment method in Japan and large retailers began accepting the cryptocurrency. But Japan is still a cash-heavy society. The J-Coin could be a way to reduce the costs of handling physical notes and coins and cutting settlement fees for retailers and consumers.

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