* LDP panel head: should create digital yen hopefully in 2-3 yrs
* Wants to put digital yen proposal on govt's mid-year policy plan
* Digital yen talks reflect Tokyo's concerns on Libra, digital yuan
By Tetsushi Kajimoto and Takahiko Wada
TOKYO, Feb 10 (Reuters) - Japan should create its own yen digital currency, hopefully "within two to three years", and include such plan in government's mid-year key policy guidelines, a senior ruling party lawmaker said on Monday.
Kozo Yamamoto, who heads research commission on the finance and banking systems at the Liberal Democratic Party (LDP), made the remark as Facebook's push to launch its Libra cryptocurrency has raised questions over whether nation states will continue to control money in future.
His comment followed similar proposals from another group of lawmakers, led by ruling party heavyweight and former economy minister Akira Amari, who wants to issue digital yen to counter China's move towards issuing its own digital currency.
"The sooner the better. We'll draft proposals to be included in government's policy guidelines, and hopefully make it happen in two-to-three years," Yamamoto told Reuters.
Yamamoto, known as an architect of Prime Minister Shinzo Abe's "Abenomics" stimulus policy, said he would work with Amari to push the government to adopt their proposals.
Japan is unlikely to issue a digital currency any time soon due to technical and legal issues, but the ongoing moves highlight pressure Tokyo feels in the face of progress China and Facebook have made on digital currencies.
Central banks across the world have quickened the pace at which they are looking at issuing central bank digital currencies (CBDCs).
Of the major central banks, China's has emerged as the frontrunner in the drive to create its own digitised money, though details of its project are still scarce.
Some Japanese lawmakers feel China's planned digital currency could spread widely among emerging economies and may be used as a way to help China advance its digital hegemony and its Belt and Road Initiatives.
The spread of digital currencies may undermine the dollar's supremacy, but it could help stabilise emerging markets such as Cambodia, which heavily relies on the dollar, Yamamoto said.
"If each country manages to control flows of money with their own (digital) currencies, that could prevent a big swing at a time of crisis and stabilise their own economy," he said. (Reporting by Tetsushi Kajimoto)