Japan is the latest country to announce intentions to launch a digital currency, Reuters has reported.
The country's parliamentary vice minister for foreign affairs, Norihiro Nakayama, has said the digital yen would keep Japan up to date with global developments in the financial world and could be a joint initiative between the government and private companies.
Four out of five purchases in Japan are made in cash, so this may be seen as an effort to bring the country more in step with its neighbours in the Asia-Pacific region.
With China announcing plans last year to launch a digital yuan, Japan would like to "propose measures to counter such attempts", Nakayama said.
Japan's finance minister, Taro Aso, has previously voiced concerns that China's plans would make the yuan the default currency of settlement in emerging economies.
He deemed this a "very serious problem", as Japan uses dollars for settlement.
A group of lawmakers of the governing Liberal Democratic party plans to submit its proposal to the Japanese government as early as next month.
The Bank of Japan is among a group of central banks that joined together last week to share points of view in assessing potential cases for centrally-issued digital currencies, which included the Bank of England and European Central Bank.
Central banks have been spurred into action by the launch of Facebook's controversial Libra project,.