Going in Cashless in Japan: a Starter’s Guide to Several Options

Despite a large number of banks and other financial services providers pushing people to use electronic payments, Japan remains very much a cash-centered society. As of the second quarter of 2021, some 76% of all transactions in the country are made using cash. The prominence of cash is so much so that in September 2021, the Bank of Japan released a new series of JPY 10,000 banknotes featuring industrialist Eiichi Shibusawa. 

But the Japanese government and the country’s major businesses are keen to ween people off their traditional reliance on cash. The latest effort involve some 70 heavy-hitters of the Japanese economy to roll out a digital currency, the “DCJPY,” by 2022. For regular folks, there is no need to wait until 2022 to reduce cash usage. Plenty of options already exist for foreign residents, including students, to set up payment methods that completely eschew the use of paper money. Below are some of the most common options.

1. Debit and Credit Cards

Japan is the land of credit cards. As of 2020, there are some 293 million credit cards in circulation. Considering that the country has 125 million people, that works out to more than two cards for every person. Dozens of credit card issuing companies, some linked to major retailers and others to banks, issue cards under the globally prominent Visa and MasterCard brands as well as the Japan-originated Japan Credit Bureau (JCB) network. The JCB network, since its establishment in 1961, has grown to a global presence in over 20 countries with more than 150 million cards. 

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Some of the best credit cards in Japan indirectly provide their users with discounts. In particular, cards issued by major internet conglomerates like Rakuten and Recruit do not have annual fees and gift points just for signing up. Points can be earned for using the cards and spent like cash against future purchases, with the best cards regularly topping more than 1% in rebates and savings if all the points earned are accounted for. 

For those who are stressed about the prospect of paying monthly credit card bills, debit cards may be a good alternative. Issued by all banks, they are linked to bank deposits so that every swipe of the card will be deducted from the account balance. Here, Rakuten also does well, given the ability to earn points on purchases and the prominence of its internet-only Rakuten Bank. Those seeking the comfort of security and predictability can opt for banks with large nationwide support networks, including Mizuho, SMBC, Mitsubishi UFJ, and Japan Post.

While getting a local credit card in Japan may sound daunting as a foreign student without Japanese language skills, the process is surprisingly easy. Particularly recommended is Japan Post Bank, which has an English website for setting up a bank account. With the bank account set up, setting up the debit and credit card is just about proving the existence of financial resources and/or a steady income. Beyond Japan Post Bank, plenty of credit card companies have products suitable for foreign residents, as many online guides recommend. While many foreigners, especially students without a steady income, do get rejected when they apply for Japanese credit cards, there are so many card issuers that it is always worth a try.

2. Contactless IC Cards

Despite the prevalence of debit and credit cards, they are, surprisingly, not the most frequently used payment cards in Japan. That crown goes to the country’s myriad contactless IC cards, most commonly used for tapping into train stations and onto buses. The ten most used IC cards, all issued by public transport companies cover all major metropolitan regions across Japan, are used by locals for their daily commutes and outings. It is no wonder that more than 80% of those in the Greater Tokyo region have used some form of it in their daily lives.

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The large volumes and regularity with which people use IC cards make them ideal for expanding their payment role beyond public transport. Since the first IC card was issued in 2000, it only took two decades for the 200 millionth to be issued, with 120 million alone for SUICA and PASMO, the two cards covering the Greater Tokyo region. The rapid growth has emerged on the back of their use in retail outlets, with SUICA and PASMO claiming more than 371,000 and 258,000 stores being able to accept the card as a valid payment method. Thanks to the technology behind their contactless payments, IC cards can especially be much faster than credit cards for quick shopping at convenience stores like Lawson, FamilyMart, and 7-11.

Beyond the speed of their payments, IC cards’ greatest merit is their ease of signing up. No bank account is needed and they can be purchased and charged anywhere that there is a train station. For SUICA and PASMO, that means a large network respectively consisting of more than 800 and 1,200 stations across the Greater Tokyo region and beyond. In the case of SUICA, the card itself can be bought for a JPY 500 deposit at any train ticket machine, without the need for a name or vetting by a station staff member. With the advent of mobile apps for IC cards, users no longer even have to go to the train stations to get and charge physical cards.

3. QR Code-Based Mobile Wallets

However, in terms of recent growth, neither credit nor IC cards can beat mobile money. Only in a few years, the idea of linking a bank account to a mobile app and paying by scanning a QR code has gone from unknown to being advertised everywhere in Japan. Banks, retailers, and telecommunications firms all jumped into the fray, with eight dominant mobile payment platforms fighting for market share based on the number of participating retailers, the amount in rebates and savings, as well as the ease of linkages with other services. 

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With the market very much still in flux, it is hard to say which mobile wallet will ultimately emerge as the dominant force. But for now, every vendor is attempting to lure more participating retailers and users by throwing money at them with discounts, discounts, and more discounts. For instance, PayPay, the most widely used mobile wallet with a 43.1% market share, allows users to earn up to JPY 15,000 per month in rebates just by using the app. D-barai and Rakuten, the second and the third most used, have also made points a major salespoint.

For regular users, getting started with mobile money is as simple as downloading a free app and linking the bank account. For mobile wallets operated by banks, such as Rakuten Pay (from Rakuten Bank) and Yucho Pay (from Japan Post Bank), bank accounts, debit and credit cards, and mobile wallets can all be linked together for central management and more rewards in the form of points and rebates. 

While cash remains king in Japan, plenty of other options exist to do day-to-day purchases without ever touching any paper money. Many of them are free to sign up, easy to install, and come with financial rewards in the form of rebates and points redeemable for discounts on future purchases. Foreign students keen to save money in Japan and make the most of their financial resources would be wise to pay attention.

Written by: Xiaochen Su, a Ph.D. candidate at the University of Tokyo and the Managing Director of the Study Abroad Research Institute, a non-profit organization seeking to promote study abroad in Japan.

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