Why Japan is deeply reluctant to give up cash
On October 1st, 2019, Japan's twice-delayed tax hike was finally rolled out, an increase from 8% to 10% on goods. On the same day, the government also introduced a scheme to reimburse cashless payments by 2-5% in the hopes of encouraging mobile and card transactions.
For a highly cash-loving country where over 80% of payments are conducted with banknotes and coins, there has been little evidence to suggest the nation is ready for, let alone interested in, this cashless change.
"There is never a good time for self-inflicted economic wounds. But the results of one Japan administered to itself 10 days ago are already in -- and they should worry global markets."
The cashless push seems in keeping with the "Cashless Vision" report, released in April last year. The report says Japan should aim to double its cashless payments by 2025 in Tokyo, two years earlier than the government's original 2027 goal.
However, the new tax policy seems to be losing the economic argument, with critics already calling it a bust. A recent article from Asia Review questions why "an economy still grappling with deflationary forces [is introducing] tighter fiscal policy during a global trade war".
"I'm not interested in going cashless. I feel uncomfortable with it in case I lose my mobile phone. It's also unclear how much I've spent compared with taking money out of my wallet."
Others are concerned that the cashless policy excludes the elderly demographic who mostly prefer cash and make up one-third of the population. Some say cashless culture goes against the Japanese way of life. Everyone else is wondering why cash use should be made less convenient when cash is the most reliable payment form, especially during power outages from earthquakes and typhoons.
"One simply can't rely on 'cashless' transactions in case of emergencies. You have got to keep some cash on hand."
Both the influx of tourism that will come with hosting the Olympic games next summer and added pressure from the China-American trade war may have something to do with the Japan's inclination to seize the day by expanding the payments landscape...but is punishing cash use the way to do it?