Last Updated on June 26, 2023 by Vlad
In the land of the rising sun, where tradition blends harmoniously with modernity, one thing remains constant: the enduring reign of cash. Despite the rapid global rise of digital payments, Japan continues to hold onto its cash is king culture. So, why is cash still so popular in Japan? Let’s explore the fascinating reasons behind this phenomenon and uncover the unique aspects that contribute to the reign of physical currency.
- Traditional Values and Cultural Significance:
In Japan, traditions run deep, and their influence extends to the realm of payments. The Japanese have a traditional saying, “genkin kakitome,” which means “cash is settled.” This belief reflects a cultural preference for immediate and definite transactions. The certainty and tangibility of cash align with the values of stability and security cherished by the Japanese people, making it a trusted form of payment.
Moreover, cash plays a significant role in Japan’s gift-giving culture. On special occasions such as weddings, funerals, and New Year celebrations, presenting “otoshidama” or “gift money” in beautifully adorned envelopes is a time-honoured tradition. This act symbolises respect, good wishes, and the value placed on the physical exchange of money.
- Limited Acceptance of Digital Payments:
While digital payment methods have gained global popularity, Japan has been relatively slow in adopting these technologies. Unlike some countries where credit cards and mobile payments are widely accepted, many Japanese businesses still prefer cash transactions. Especially in rural areas and smaller establishments, you’ll find cash as the primary mode of payment. Even restaurants in the big cities like Tokyo or Osaka, might only take credit card payments at night, while for lunch it is cash only (or they’ll take a card payment, but will charge you consumption tax again on top of the price that already includes consumption tax! Yep, you read that right! It happened to me the other day while having sashimi for lunch).
One reason for this limited acceptance is the cautious nature of the Japanese people when it comes to new technologies. Security concerns play a significant role in their decision-making process. With the prevalence of high-profile cyberattacks and identity theft incidents globally, the Japanese prefer the tangible nature of cash as a more secure option. They have a genuine trust in the physicality of money, making them hesitant to fully embrace digital payment methods.
- Demographics Play a Key Role:
Another significant factor contributing to the popularity of cash in Japan is the country’s demographics, particularly the large population of older adults. Japan has one of the oldest populations in the world, with a considerable percentage of its citizens being elderly. This demographic trend has a direct impact on payment preferences and the continued reliance on cash.
Older adults in Japan often feel more comfortable with cash transactions due to their familiarity and long-established usage. They may have grown up in an era when digital payments were not prevalent, and as a result, they tend to prefer the simplicity and tangibility of cash. The trust they have developed over the years with physical currency further reinforces its popularity among this demographic.
- Wariness of Credit and the impact of Bubble Bursting
Another crucial aspect contributing to the enduring popularity of cash in Japan is the cultural wariness towards credit and the lasting impact of the economic bubble bursting in the 1990s.
Japan experienced a significant economic bubble in the late 1980s, characterised by soaring asset prices and speculative investments. When the bubble eventually burst in the early 1990s, it led to a prolonged period of economic stagnation and financial hardship for many individuals and businesses. This experience left a lasting impression on the collective consciousness of the people and shaped their attitudes towards credit and financial stability.
The aftermath of the bubble bursting instilled a sense of caution and aversion to excessive debt and risks among the Japanese population, be it home loans or credit cards (or even being your own boss and starting a business). Many individuals and businesses faced severe financial difficulties during this time, leading to a general reluctance to rely heavily on credit. Instead, the Japanese adopted a more conservative approach, preferring to make purchases with cash or using their own savings to avoid the risks associated with borrowing and debt.
This wariness towards credit and a desire for financial stability have contributed to the continued reliance on cash. Cash transactions provide a sense of immediate settlement and control over personal finances. Unlike credit, which accumulates interest and leads to potential debt burdens (cough, cough Australia or the US), cash offers a tangible and transparent means of managing expenses without the lingering fear of financial instability.
- IC Cash Cards:
Amidst the cash-centric culture of Japan, IC (Integrated Circuit) cash cards have emerged as a bridge between tradition and technological progress. These cards, commonly known as “IC cards” or “electronic money,” offer a convenient and secure alternative to cash transactions while still preserving the essence of physical currency.
IC cash cards are contactless, pre-paid smart cards allowing users to make quick and effortless payments. The most widely used IC cash card in Japan is the Suica card and Pasmo card.
One of the primary advantages of IC cash cards is their versatility. They can be used for a wide range of transactions, including transportation fares, shopping at convenience stores, vending machine purchases, and evening for purchasing meals at some resturants. This convenience has made IC cards a preferred choice for many Japanese people together with the fact that they are pre-paid, as they eliminate the need to carry a significant amount of cash or worry about exact change, or worrying about going into credit card debt.
- Cash-Dependent Industries:
If you stroll through the vibrant streets of Japan, you’ll notice the strong presence of cash-dependent industries. Vending machines are a testament to the cash-driven culture. These machines have become an iconic symbol of Japanese convenience, and their reliance on cash transactions ensures smooth and hassle-free purchases.
Similarly, small businesses and street markets in Japan still rely heavily on cash. From bustling food stalls offering delectable street food to charming shops selling traditional crafts, these establishments often operate on a cash-only basis. The simplicity and speed of cash transactions make them an efficient choice for both customers and business owners, fostering a unique charm that is deeply embedded in Japanese daily life.
- Physical Currency and Cultural Etiquette:
In Japan, physical currency goes beyond its functional role as a medium of exchange. It holds cultural significance and is intertwined with social etiquette. When receiving change from a cashier, it is customary to receive the money with both hands, expressing gratitude and respect. Similarly, when offering cash to someone, using both hands and presenting it with a slight bow is considered polite and demonstrates appreciation.
The emphasis on physical currency also extends to the way people handle and organize their money. It is common for individuals to carry a designated wallet solely for cash, keeping it separate from other cards and identification. This practice showcases the reverence given to cash and highlights its importance in the daily lives of the Japanese people.
Closing remarks
As we’ve explored, cash continues to be the reigning king of payments in Japan. Rooted in traditional values, cultural significance, and unique customs, cash maintains its stronghold despite the rise of digital payments worldwide. The Japanese people’s trust in the security of cash, combined with its prevalence in cash-dependent industries, keeps it firmly embedded in daily life. While Japan is gradually embracing digital payment technologies, the transition remains a balancing act between tradition and innovation. As we come to the end of this post, let’s appreciate the cultural richness and fascinating aspects that make cash an integral part of Japan’s payment landscape. And remember to always carry cash with you when travelling anywhere in Japan.