The Japanese government has announced a system whereby shoppers utilising cashless payments will receive a 5% reward-point refund in an attempt to support domestic demand after a planned tax hike in October 2019. 

Japanese Prime Minister Shinzo Abe introduced the idea in late November, as a way of preventing the rise in consumption tax from clouding consumer spending. The planned increase will see the tax rate hike from the current 8% to 10% next October.

Liberal Democratic Party policy chief Fumio Kishida reported that Abe had detailed his proposal, and specified that the 5% rebate plan is expected to run for roughly nine months till June 2020; leading up to the 2020 Tokyo Olympic and Paralympic Games.  

According to official sources, the refund will be distributed in the form of points rather than cash, and will apply to payments made specifically through cred cards and other cashless transactions, as the government looks towards endorsing the cashless craze which the Japanese society has so far been reluctant to address. The rebate system will not be applicable to transactions made in large department store chains.

Abe further pointed out that the initiative is part of a several steps the government is taking towards ensuring that the planned tax increase will not lead to deflation and will not cloud economic growth.

Other measures the government is taking towards securing Japan’s economy include setting aside ¥2 trillion in the fiscal budget of 2019. 

Prior to the announcement, the government said it would consider a 2% compensation in the form of points that could be used for future transactions. The payments will however, be constricted to credit cards, digital money, or other forms of cashless payment.