The use of noncash payment methods for regular payments and the household demand for cash: evidence from Japan
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The use of noncash payment methods for regular payments and the household demand for cash: evidence from Japan Hiroshi Fujiki1 Received: 19 June 2018 / Revised: 7 January 2020 / Accepted: 17 January 2020 © The Author(s) 2020
Abstract Understanding the demand for cash and noncash payment methods is an important policy concern in Japan, as the Japanese government aims at a cashless economy. Previous studies show that the demand for specific payment methods depends not only on the motivations of the kind of transactions, such as day-to-day transactions or hoarding, but also on payment contexts, such as bill payments or online payments. However, a few studies have investigated the demand for payment methods by payment context in Japan. We fill this gap by examining Japanese family and single-person household data on the choice of cash and noncash payment methods for regular payments, including bill payments. We found a decreasing popularity of choices involving automatic withdrawals and an increasing popularity of choices involving credit cards in both data sets and that of choosing exclusively cash in the single-person households’ data. We also found that these changes are associated with a decreasing demand for cash in family households and, conversely, an increasing demand in single-person households, assuming that the current pace of gradual adoption of noncash payment methods continues. In promoting a cashless society, the Japanese government should pay attention to the finding that a more frequent use of credit cards for regular payments is not always associated with a decrease in the demand for cash. JEL Classification D14 · E41
* Hiroshi Fujiki [email protected]‑u.ac.jp 1
Faculty of Commerce, Chuo University, 742‑1 Higashinakano, Hachioji‑shi, Tokyo 192‑0393, Japan
13
Vol.:(0123456789)
The Japanese Economic Review
1 Introduction 1.1 Background, motivation, and major results In this paper, we examine the use of noncash payment methods with a special attention to regular payments in Japan. To convey to readers the importance of this research, this subsection begins by explaining the area of payment economics and why empirical economists care about the choice of payment method, especially cash and noncash payments. The subsection then explains the policy issues arising concerning the choice of payment methods unique to Japan, and argues why regular payments are a worthwhile direction of inquiry. The subsection ends by briefly summarizing the most important empirical findings in the paper. First, payment economics studies the mechanics of exchange, especially payment systems. The glossary of payments and market infrastructure terminology by the Committee on Payments and Market Infrastructures (CPMI) (2016) classifies payment systems into large-value payment systems (LVPS) and retail payment systems, with LVPS being a funds transfer system that typically handles large-value high-priority payments. Typically, LVPS settles obligations between banks, and, therefore, includes the BOJ-NET in Japan and the
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