Sunday, 7 May 2017

End Japan's Cash Obsession

Make spending easier, not just cheaper.

After two lost decades, Japan's consumer spending isn't going anywhere. You can't leave it at blaming an aging population. Young(er) people still exist in Japan, and older people still need to spend money too. You would think that by now, prices would have fallen to the point where bargains emerge and there's some demand support, if not upward pressure.

Things have been pretty sweet for consumers. A bag of rice being the same price in 2016 as in 2006? Bring it! Credit has seldom been cheaper either.

The problem is that as reasonable as prices are, it's still difficult to act on them. I'm going to highlight three barriers to spending in Japan: lack of electronic payment options, access to cash, and price display of sales tax.

But first, to Australia. During a one month visit there, I used cash only twice. Every other time, I tapped or swiped or keyed in my card details online. And it's not that I was forced to use cash on those two occasions, it's just that I could make proper change out of the dormant coins in my wallet. My public transport fare card could be recharged with a tap of my debit card, marking one way pokey Adelaide - not to mention Sydney or Singapore - has overtaken Tokyo.

Admittedly, you CAN recharge Japanese IC cards electronically, but in very limited ways. Despite what ticket machines say, you can't use any old Visa or Mastercard, but are restricted to those from specific Japanese issuers. I'm surprised that standardising toilet controls has greater priority than this for the 2020 Olympics.

And while more shops accept credit cards, smaller ones are unapologetically cash only. No, sheepishly making an 'x' with your hands does not count as an apology.
'X' Hands
"Wipe that smirk off your face, young m... er..."
This is a lost opportunity. US and Danish studies indicate that people tend to spend more when empowered to pay electronically, noticeably boosting economies. The explanation is that swiftly tapping a card stings less than rummaging for cash, allowing purchasers' minds to relax spending control.

Despite its dominance, access to cash is troublesome in Japan. Many ATMs are closed outside business hours, leaving only extortionate third party machines hungry for your desperate transaction fees. Dear spouse claims that conventional ATMs need labour in the form of stockers, guides, and greeters, negating the 'A' in ATM. I don't know about the average Japanese, but I'd rather withdraw cash when I please than have an old man with white gloves bowing at me beforehand. Churr bro, but I know what an ATM looks like.

Additional, uncertain costs also heighten spending friction, and spending control. If you don't know how much the total bill will be, you'll be a little more conservative. Sales tax is a simple enough concept, but because displayed prices do not consistently include or exclude surcharges, you're almost always in for a little shock when you get to the register, especially if you'd proudly assembled what you thought was exact change beforehand. Contrast this to Australia, where GST-included prices are mandated and often nice round numbers, leaving the burden of tax calculation where it should be: with price-setting vendors. Not having to mentally factor in GST and other surcharges allows Australian consumers to spend a little easier.

Japanese shoppers face practical and psychological barriers to payment. The government should realise that helping them pay will help them spend.

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