Japan’s card payments market is expected to grow by 7.5% in 2023 to reach JPY97.3 trillion ($742.4 billion) in 2023, driven by the growing consumer preference for electronic payments, says GlobalData, publishers of EPI.

GlobalData’s Japan Payment Cards Analytics reveals that card payments value in Japan was estimated to register a healthy growth of 7.9% in 2022, driven by the rebound in economic conditions and rise in consumer spending.

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Japan saw a marginal growth of 1.9% in card payments value in 2020, as it was grappling with Covid-19 pandemic and economy falling into recession. However, with economic rebound, the Japanese card market revived registering a 9.3% growth in 2021.

Kartik Challa, Senior Banking and Payments Analyst at GlobalData, said: “Japan has traditionally been a cash driven society with cash accounting for almost two-thirds of the total payment volume in 2022. However, the use of card payments has been rising since the past few years supported by the concerted efforts by the government coupled with robust payment infrastructure. The Covid-19 pandemic also supported the growth of the non-cash payment methods, as consumers switched to digital payments to help contain the spread of the virus.”

Japan’s cash displacement drive

Japan has also been taking steps to push digital payments in the country with an aim to bring cashless payments down to 40% of the overall payment transactions by 2027. It promotes electronic payments in the country through various initiatives, including raising the awareness of electronic payments among the individuals and businesses, promotion of cashless payments at small merchants and self-service kiosks, and availability of digital payments for services at government establishments.

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In terms of consumer preference, while debit cards dominate in terms of card penetration, credit cards are widely preferred when it comes to usage, with credit cards accounting for 96.3% of total card payments value in 2022. This is mainly due to the associated reward programmes, which are more beneficial than debit cards. Credit cards have wider acceptance among the merchants while debit cards are not that popular due to their longer settlement period.

The growth in the e-commerce market is also anticipated to support the payment cards growth, especially credit cards. According to GlobalData’s 2022 Financial Services Consumer Survey*, credit cards are the dominant payment method for e-commerce payments with 58.4% share in 2022.

Challa added: “The Japanese card payments market is back on growth trajectory with rebound in economic activities, rise in consumer spending, increase in e-commerce payments and government initiatives. The country’s card payments market is anticipated to grow at a healthy CAGR of 6.3% to reach JPY115.6trn ($882.4 bn) in 2026.”

GlobalData’s 2022 Financial Services Consumer Survey was carried out in Q2 2022. Approximately 50,000 respondents aged 18+ were surveyed across 40 countries.