Japan is making real progress in cashless payments

Written by Kapronasia || August 07 2023

Japan’s cashless journey is unique in Asia. While most countries in the region that have accelerated cashless payments in recent years are seeking to simultaneously boost financial inclusion, Japan is one of Asia’s best banked countries, with more than 95% of its adult population having a bank account. For Japan, going cashless is not about increasing participation in the formal financial system, but rather about reducing cash-related costs, as well as bringing the country’s technological prowess to financial services and increasing competition in the financial sector.

In 2022, cashless purchases reached 111 trillion yen (US$838 billion), accounting for 36% of all payments, according to data from the Bank of Japan, the Japan Consumer Credit Association and the Payments Japan Association. The 17% annual gain brought the total above 100 trillion yen for the first time.

A survey by the industry ministry last year found 54% of respondents use cashless payments at least 70%-80% of the time. Such payments were made 14.5 billion times, excluding credit cards, for a 29% increase -- the strongest growth since tracking of comparable data started in 2019.

At this rate, Japan may hit the 40% milestone in the government’s Cashless Japan initiative ahead of schedule. The goal is to be 40% cashless by 2026.

Pre-pandemic, the Japanese government had a harder time hiking the cashless payments rate because there was no compelling reason for people who preferred to pay with cash to do otherwise. While the U.S. has an increasing number of hotels and retail outlets that do not accept cash, the same does not hold true for Japan. It is always possible to pay for a transaction with cash in the Land of the Rising Sun.

Japan is also safer than many other countries, with low rates of violent crime. With a low risk of being the victim of a robbery, opportunistic or otherwise, Japanese people do not see carrying a large amount of cash as risky.

Yet the pandemic highlighted the possible risks of disease transmission via paper notes and coins. While scientific evidence shows that most transmission of the coronavirus occurs in the air – and not on surfaces – in Japan a perception emerged that it is more hygienic to use cashless payments.

For that reason, cashless payments have gotten an extra boost in Japan. Meanwhile, incumbent banks are now hopping on the bandwagon. From the start of 2022, Japanese banks began imposing stiff charges of up to ¥1,100 on anyone depositing large numbers of coins. Unwillingness to pay the fees has probably caused many households to stop using piggy banks and generally to avoid accumulating change by using cashless technology for smaller payments.