Economy

OPINION: How Japan Is Becoming A Fast Emerging Cashless Economy

Oscar Wilde was absolutely right when he said, “The whole of Japan is of pure invention. There is no such country, there is no such people in the world.” Having quoted that. Japan and the Japanese have always been headliners when it comes to modern innovation and technological advancements with its deep cultural roots still intact. This is a place where modern trends and infrastructure co-exist in unison with ancient, traditional values and principles.

The onset of the Covid-19 pandemic has given global economies to digitally transform all their industries to keep up with the rapidly evolving B2B and B2C requirements. One such rapidly evolving sector is banking and finance. People all over the world wanted ease of online transaction and avoid long queues at banks. Thus, the need of digital wallets and E-payment systems significantly rose.

The Japanese government is preparing to introduce a system for companies to pay salaries digitally – without going through bank accounts – by spring 2023. By promoting this system, which allows companies to transfer salaries to workers using smartphone payment apps, the government hopes to solve the complex issues facing foreign workers in Japan, expand the financial services market and deregulation, and promote growth.

However, according to a survey of 247 companies conducted by Works Human Intelligence, a leading developer of integrated HR systems for corporate clients, less than 30% of companies are considering or will consider implementing digital salary payment. The survey found that system and operational costs and increased operational person-hours were the main barriers.

The potential benefits of paying salaries digitally are significant. It reduces administrative fees associated with payroll payments and helps foreign workers, who often find it difficult to open a bank account. Companies can also indirectly offer benefits such as cashback and point rewards for using QR code payments and e-money payments as part of their employee benefits program. On the other hand, the survey highlighted that most companies are not yet ready to adopt such a system.

In 2018, the Ministry of Economy, Trade and Industry (METI) formulated the “Cashless Vision,” which proposed measures for Japan to move towards becoming a cashless society. It aims to increase cashless transactions to 40% by 2025, when the Osaka Expo is held, and possibly 80% in the future. The goal is also to help solve issues such as labour shortages, regional revitalization, and productivity improvement.

The Cashless Promotion Council, which brings together government, educational institutions, research institutes, and private companies, was also established in 2018 to support this initiative across industries for a cashless society. According to its roadmap, the percentage of cashless payments in Japan rose from 13.2% in 2010 to 32.5% in 2021. This is slow compared to other Asian countries: South Korea, China and Singapore all had higher percentages in 2020, at 93.6%, 83%, and 60.4%, respectively.

Japan has recently eased its COVID-19 entry restrictions, and expectations have been rising for the economic benefits that tourism could bring. Foreign tourists are accustomed to the convenience of cashless payments, and Japan needs to move fast on this in order to fully take advantage of this economic opportunity.