In the era of e-commerce, global physical shops have plummeted, but Japan is an exception.
The Japanese prefer physical things, money is one, in Japan, cash transactions as high as 82%,but the government is calling for cashless payments to double to 40% by 2027.
In Japan, the proportion of cash transactions is as high as 82%, but the administration prepares for the 2020 Olympics, presenting a “cashless payment vision” report in the hope of boosting mobile payment usage and business opportunities. It will be interesting to see if the Japanese government’s campaign to switch from using cash will lead to a significant increase in the share of mobile payments.
The extent to which the Japanese love cash often makes foreign tourists feel incredible. Because it doesn’t match Japan’s image as a tech powerhouse. Many tourists think that since the world’s third-largest economy is known for its bullet trains, robotic assistants and futuristic vending machines, it will be just as advanced in mobile payments.
But this is not the case. Even in Tokyo, the world’s largest metropolitan area, many restaurants and bars accept cash only. English newspaper for The Japan Times (The Japan Times) research suggests that food index website Tabelog 135764 on a restaurant in Tokyo, of which only 49350 accept credit CARDS.
But Japan now aims to double the proportion of cashless payments by 2027:40 per cent to increase transaction transparency, make foreign tourists more willing to come to Japan and reduce unnecessary costs. The Nomura Research Institute estimates that the cost of producing and transporting money per year alone is more than 1 trillion yen (about $9 billion).
In the short term, Japan wants to prepare for the 2020 Olympic Games, when thousands of foreign tourists will visit Tokyo. And many visiting international tourists prefer to use credit cards, billing financial cards or smart phones to spend, rather than using Japanese currency.
According to the Japanese authorities’ Cashless Vision report, losses could reach 1.2 trillion yen by 2020 if the country doesn’t reduce cash payments.
The demand for mobile payments from a large number of Chinese tourists has also raised the pressure on Japan. Because mobile payments are so popular in China, cash-only Japanese restaurants and shops can overwhelm Chinese tourists.
China has now overtaken South Korea as Japan’s largest importer of tourists, growing from 1.4 million in 2012 to 8 million in 2018. The March report in the Wall Street Journal noted that the potential for Chinese tourists to spend is staggering, spending 14 billion of dollars during a trip to Japan last year. With money to make a fool of themselves, Japanese merchants are gradually using China’s popular Alipay and WeChat to pay for more business opportunities.
Perhaps, however, digital money will do more for Japan’s cashless revolution than plastic money. Japan has been a virtual currency center since the birth of Bitcoin in 2009. The Japanese were one of the first users of the revered cryptocurrencies. The world’s largest virtual currency exchange, Mt. Gox is the origin of a Japanese company. Many independent Japanese retailers accepted bitcoin early on in order to attract tech-loving customers and separate themselves from large chains.
Meanwhile, the Japanese government is also taking a pragmatic approach to regulating blockchain technology. Instead of banning virtual currencies, as China and South Korea do to prevent spooky cryptographic transactions, they are beefing up security so that the technology can be smoothly integrated into Japan’s existing financial system. Today, Japan is the only major country to recognize virtual currencies as legal tender.
In March of this year, Japanese media alleged that East Japan Railway Company, or JR East Japan, might accept passengers to buy tickets using virtual currency. It is reported that JR East Japan and network Cloud operators Japan Internet Network first Company (IIJ) is discussing how to combine Bitcoin and other digital currencies with the Japanese inductive traffic card “Watermelon card” (Suica).
Japan is still far from cashless
Despite steady progress in cashless transactions, Japan is still a long way from achieving the target of 40% cashless payments in 2025. A report in January by the Tokyo Review, an english-language media platform, showed that the rate of cashless payments in Japan has slowed over the past few years. In 2017, for example, e-currency transactions reached 5.2 trillion yen, up just 1.1 percent from the previous year. By contrast, growth was much faster in the first two years, at 10.8 per cent in 2016 and 15.7 per cent in 2015.
One reason for the slowdown in cashless payments may be much the same as a platform glut. The e-wallet supplier in Japan has Line pay, Pay Pay, a mobile payment by SoftBank Group Corp.) and Yahoo Japan, and the Family Mart of the chain convenience store, E-commerce giant Lotte (Rakuten) and second-hand trading network platform Mercari are endless. Some electronic wallets use QR codes, while others are equipped with near field communication (NFC) technology. Each has his own advantages and disadvantages.
New incentives from the Japanese government may increase willingness to use them
The February report of the Nikkei Asian review noted that the Japanese Government had unveiled a series of new incentives this year to push for cashless payments. Examples include allowing companies to use mobile phones to pay their salaries, increasing the use of debit CARDS (which currently account for only 0.4% of all payments in Japan), and supporting unmanned stores that use cashless payment systems.
Incentives certainly help boost Japan’s cashless payments, but may not be as fast as government expectations. As the Wall Street Journal article puts it, the Japanese are concerned that electronic payments could infringe on their data privacy. If e-wallet suppliers are from China, doubts are even greater. Mizuho financial group, for example, is working with alipay and China unionpay to develop a payment App. Mizuho must convince customers that their data is secure and will not fall into the hands of the Chinese government.
In general, the prevalence of cash in Japan is influenced by culture. With a low crime rate, Japanese people can safely carry large amounts of cash out of the house. Counterfeit notes are also rare in Japan.