Cashless Society in Japan – Modern Convenience or Orwellian Nightmare

Cashless Society in Japan –  Modern Convenience or Orwellian Nightmare

It is no secret Japan is trying to become a cashless society For the past year, I have heard the word “cashless
society” in countless discussions and debates A country that is striving to
become a cashless society will try to decrease the amount paid in banknotes
and encourage transactions that are done electronically There are many ways to pay cashless There are debit cards that pay straight from the bank account, credit cards that allows you to borrow money and hold a balance, prepaid cards that you can charge with money and then pay and lastly mobile paying, which is also
the transaction method that has become more and more popular in Japan during
the last year For many years Japan has been a society where cash is the king According to a study that was conducted by the Ministry of Economy in 2016, only
20% of the transactions in Japan were cashless This is distinguishably low compared to other developed countries It’s not that Japanese don’t have credit cards available In fact JCB published a study that in 2017, 84% of the citizens held a credit card and one person held on average 3.2 cards There are many speculations as why Japanese prefer to use cash Some of which are: Because Japan is safer than other countries, so holding cash poses less risk Or because Japan is an aged society with more older people who might prefer cash Or maybe because the interest rates are so low, that there is little merit to depositing cash to ones bank account Whatever the reason, it is evident that Japan is lagging behind other countries, when it comes to the cashless movement To catch up with other countries and truly make Japan a cashless society The Ministry of Economics organized a campaign
starting from October 2019 which continues until June 2020, where
consumers can receive two or five percent discount, should they pay cashless The discount is in effect paid by the government as well as the installation of the POS devices needed to facilitate these transactions It doesn’t matter whether the consumer pays with credit, debit, prepaid card or mobile As long as the transaction is cashless, the total is
reduced by two percent in franchise stores and five percent in other stores Gaining popularity from this cashless campaign, many mobile payment applications have entered the market There is LinePay, RakutenPay, MerPay, OrigamiPay, PixivPay, YuchoPay and the most original called PayPay These applications work using the popular QR-code technology, where merely scanning the code is sufficient to receive or send a payment Should these applications not suffice, one can also opt for the Google or ApplePay That work via NFC (Near Field Communication) The technology for cashless payments has existed for many decades So why the sudden rush? The Ministry of Economy claims the reason for going cashless is the increased convenience for consumers as it makes paying easier, while automating
the record-keeping for purchases to help control spending budgets In addition to this, they claim that going cashless will increase productivity as the effort that went into handling cash can be eliminated Cashless payment options can also allegedly allow companies to increase demand from foreigners as foreigners are more accustomed to cashless transactions And lastly the Ministry of Economy claims that the data that is generated from consumer
purchases can be leveraged to use in precise marketing instruments These can all be valid reasons for going cashless But there are some potential
downsides, that I feel are not being mentioned Which we should be aware of Recording, storing and sharing financial
transaction data is a power that is ripe for abuse Consider all the things you purchased for the last year Now imagine that someone could know when
and where you made those purchases And you can understand how accurately they
could profile you, and the various malicious ways this information could be used We can already see how this kind of system has played out in China Where if you are blacklisted in the social credit application you can lose the ability to buy train or plane tickets We might like to think, that our governments are more
ethical and would never trample on individual liberties like this But can we make the same assertion for years into the future Once a system like the social credit in China has been established the switch to a digital dictatorship is always only a push of a button away Even if the situation never degrades to this point, it is much more likely That our financial data will be feasted on by corporations That can utilize this information to target us
with advertisements *You gotta tell me exactly how to stop these targeted ads* *It’s driving me crazy* Yes, it is possible to use this data ethically But in the end, which do you think the corporations value more Our well-being or their bottom lines Another potential negative downside to cashless society is the added economical burden Let me explain what I mean by this When we buy something in the store and pay with cash there generally isn’t additional fees If an apple costs two dollars you pay two dollars of course with the added value added tax However, when paying with a credit card
, it is not uncommon that a middleman usually called MasterCard or Visa takes a cut Sometimes the merchant holds this burden onto themselves but sometimes they can pass it on to the consumer It is quite naive to think, that if we transitioned to a fully cashless society the middlemen facilitating these transactions, whether card companies or mobile app providers, would offer their services for free But at this point when paying with cash is no longer an option We would have very little discourse, and
could end up paying a small fee every time we make a purchase Another potential economic burden, that gets little attention is the implementation of negative deposit rates Simply put, the traditional economic wisdom has been, That when we face a recession, the central bank cuts the rates roughly 5% to ease lending and stimulate economic activity Before the great financial crisis of 2008 and 2009 Just the idea that interest rates could be negative was absurd Who would lend money, if the amount they got back in the future, would be smaller than what they lent Today countries in Europe and Japan have made
it a new normal to have negative interest rates Having negative interest rates makes it more difficult for banks to generate revenue through Treasury bonds and other lending activity As I have mentioned in my previous videos, the
interest rates for depositors today are close to zero, but at least they are not on the minus side It has been forecasted, that at some point the banks might have to implement negative interest rates on depositors accounts Which would mean, that you have to pay the bank for keeping your money there There are already multiple studies and working papers by the IMF and others on, how to implement these negative rates and most seem to utilize the concept of digital money If you can’t withdraw your money in cash, what can you do when the back flips the interest rates to minus These were some potential ways that the cashless system could be abused I don’t think that there is nothing inherently wrong with going cashless Technology in itself is not good or bad, it is only a tool for achieving a goal that we ourselves set This is why I think the technology we are going to use for our financial transactions Should be democratized and decentralized in a way that no central party can start abusing this immense power Cryptocurrencies and decentralized finance hold a lot of hope in these aspects But have still to clear some technological and educational hurdles in order to be implemented Maybe I will go into more detail about this in the future videos That is all for today’s video I hope you learned something about the Japan’s cashless society situation If I forgot to mention something, please tell me in the comment section I always appreciate this kind of communication See you in the next video!

2 thoughts on “Cashless Society in Japan – Modern Convenience or Orwellian Nightmare

  • Sources:

    Cashless Vision – Report by Ministry of Economy (JAP)

    Study regarding credit cards by JCB (JAP)

    Ministry of Economy Website: About Cashless (JAP)

    Cashless Campaign – Leaflet by Ministry of Economy (JAP)

    Guidelines for registering to the campaign as a store (JAP)

    Cashless is spreading – PR Video toward consumers (JAP)

    Connecting via cashless – PR Video toward businesses (JAP)

    Social Credit: China's Digital Dystopia In The Making

    Breaking Through the Zero Lower Bound – IMF Working paper

    Market Reforms at the Zero Lower Bound – IMF Working paper

    Enabling Deep Negative Rates to Fight Recessions: A Guide – IMF Working paper

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