On Tuesday October 1st, a proposal by the Japanese government to hike its sales tax from 8% to 10% was put into effect. Part of the aim of this move was not only to increase revenue and trim the country’s deficit, but the government also saw it as a perfect opportunity to push Japan into becoming a cashless society.
Tokyo’s government is looking towards a greater implementation of cashless payments because it believes the expansion of modern financial tools is crucial for the country to welcome “the fourth industrial revolution of artificial intelligence,” says Maurizio Raffone in the Nikkei Asian Review.
Non-cash transactions and digital payments are also easier to monitor, protecting people against fraudulent activity and inviting efficiency in flow of money.
Japan is already well on-track to becoming a cashless society. Towards the beginning of this year, over 50 banks in Japan joined forces to launch a new cashless payment system developed by Mizuho Financial Group.
Earlier in 2019, the Japanese Tourism Agency also announced plans allowing tourists visiting the country to use contactless payments, in an attempt to lure more foreigners to the country and boost the economy.
In 2017, the Ministry of Economy, Trade and Industry released a fintech policy paper establishing three main goals, which included increasing the amount of cashless payments from just above 18% in 2017, to 40% by 2027.
This incentive has triggered the enhancement of electronic payment systems, together with the 2017 revision to the Banking Act in support of the introduction of “open banking.” The sales tax hike is the next step forward to encouraging a boost in cashless payments.
Japan’s last sales tax increase drove the country into a recession, but the METI has deployed incentives to curb this risk, including a system whereby shoppers utilising cashless payments will receive a 5% reward point refund. The Japanese government launched this proposal to support domestic demand ahead of the planned sales tax hike, and as a means of encouraging people to shift to cashless methods of payment.
This aim of this nine-month long campaign was not only to drive and encourage the use of e-payments, but also as a way of preventing the rise in consumption tax from clouding consumer spending. The Japanese government is as a result, hoping that the sales tax will translate into a massive boost for the e-payments industry.
