Japan has moved a step closer towards issuing a digital yen with a panel of experts urging the government on Wednesday to begin laying the legal groundwork in case the country decides to issue central bank digital currencies (CBDC).

In a list of proposals presented to the finance ministry, the panel also said it would be difficult to pay interest on CBDCs as doing so could erode the value of cash.

Central banks around the globe have been studying and working on digital versions of their currencies for retail use to avoid leaving digital payments to the private sector amid an accelerating decline in the use of cash.

Japan's government has made no decision yet on whether to issue a digital yen. But the central bank has been conducting experiments on CBDCs, and began discussions with private companies on a private programme for developing a digital yen. (Reporting by Leika Kihara; Editing by Lincoln Feast.)