Despite its reputation for technological advancement, Japan remains a largely cash-dominated society. Will tourism and the upcoming Olympic Games change consumer habits?

Japan’s economy is going through a crisis, with real GDP growth declining from 4.7% in 2010 to 0.1% in 2014. A growing elderly population, shrinking workforce and declining exports are contributing to its economic decline.

The government expects the economy to recover, with increases in consumer spending and capital investments over the forecast period (2015-2019). Economic improvement is expected to attract investment in the cards and payments industry.


Japan continues to be a cash-dominated society, although payment cards have gained prominence in the last decade. In terms of transaction volume, cash accounted for 86.2% of the total cards and payments industry in 2014.

At 12 in 2014, the number of transactions per card per year is far lower in Japan than in its regional peers Australia (103.1), South Korea (57.6) and India (14.7).

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Government initiatives to promote electronic transactions, the upcoming Olympic Games, the adoption of payment technology such as EMV and NFC, and improved infrastructure to accept foreign-issued cards are expected to drive growth in payment cards over the forecast period.

Credit cards the preferred choice

Traditionally, credit cards have been the most popular payment card among Japanese residents, as a result of the rewards and other pricing benefits associated with them, and their high acceptability.

Credit cards accounted for 82.7% of the overall payment card transaction value in 2014. The number of credit card transactions almost doubled from 4.6bn in 2006 to 8.6bn in 2014; it is estimated to reach 8.8bn by 2015. However, credit card payments account for only 14% of total consumer spending in country, providing significant potential to expand.

Most convenience and department stores in Japan do not accept debit cards; credit cards, however, are widely accepted at locations such as airports, convenience stores, restaurants, malls, fuel stations, hospitals and other service centres. In a bid to capture the large untapped market, credit card issuers, offer pricing benefits in the form of no or low annual fees, and reward programs.


International events to provide impetus

The 2020 Olympic and Paralympic Games are expected to boost to the country’s cards and payments industry. The government aims to welcome 20m tourists a year by 2020, but is expected to surpass the target well before this date, as 19.7m tourists visited Japan in 2015.

The Japanese government has appealed to banks and card issuers to make ATMs compatible with foreign-issued payment cards, as the majority of ATMs in Japan were previously not. Many financial institutions, such as Japan Post Bank and Seven Bank have since installed ATMs that accept foreignissued credit cards.

Sumitomo Mitsui Banking, Mitsubishi UFJ and Mizuho Bank have also announced plans to make their ATMs similarly compatible. The number of ATMs accepting foreign cards is forecast to increase from 48,000 in 2014 to 80,000 by 2020.

Some banks are looking to attract tourists with specialised services. Mitsubishi UFJ has increased the number of English-speaking executives to assist tourists, while Seven Bank increased the languages displayed at its ATMs from four to 12 in December 2015.

A rise in international travellers and increased tourist expenditure have provided new scope for Japanese merchants. This is expected to encourage more of them to accept card payments.