The Journal The Authority on Global Business in Japan


Will debit cards at last
replace ATMs?

The likelihood is emerging that within this year, cash registers at retail stores or parcel delivery agents will be able to dispense cash to customers, obviating the need for in-store ATM terminals, according to the Financial Services Agency (FSA).

The deregulation, enabled through fusing of financing and information technology—fintech—is seen as a boon to rural and suburban parts of the country, where there are far fewer ATMs than in cities. It will also provide added convenience for elderly people unable to move far from their place of residence.

The new system will involve the use of debit cards that enable customers at retail outlets to have the cost of their purchases withdrawn at the time of purchase from their account at a bank or other institution. At the cash register in a supermarket, for example, a customer will not only be able to purchase goods, but by entering a PIN number be able to arrange to receive an infusion of cash. At the time of the transactions, the remaining bank balance will be indicated. Any service charges for the transaction will be borne by the retailer.

In addition to cash-register transactions, the FSA envisages use of mobile terminals by parcel delivery companies or in taxis, allowing account holders to withdraw cash from their accounts either at their own home or while in a vehicle—a move further expected to support the elderly.

A bureaucrat at the agency was quoted as saying that, while his agency is inclined to support the change in 2016, “There are still many issues that must be clarified concerning what rules will be needed. We will listen to the practical opinions of people from various sectors.” For example, unlike ATMs, the amount of cash that can be placed in a cash register, or how much a delivery driver can carry, are limited. So the maximum amount per withdrawal is likely to be relatively small.

Moves are already underway to respond to the proposed deregulation, with Mizuho Bank said to be readying new services to launch in its 2017 business year. The company is pushing a new type of cash card—named J-debit.

Optimism over the convenience afforded by debit cards may be misplaced, however. In Japan’s cash-based economy, credit card transactions at present only account for about 14 to 15 percent of individual consumer spending. Debit cards account for less than 1 percent of purchases. While stores accepting the cards may hope for a modest upsurge in business, they are also concerned about disadvantages in the new system, such as adding to the workload of store employees, as well as the additional security measures needed to cope with heightened risks. As such, analysts appear skeptical that substantial change will take root anytime soon.


Boost to seaport funding eyed to lure cruise ships
As part of efforts to promote tourism, the Ministry of Land, Infrastructure, Transportation and Tourism (MLIT) is reportedly proceeding with legislation to be proposed in the current session of the National Diet. The new laws would provide funding to the private sector for expanding terminals for passenger ships. By harnessing the private sector’s knowhow to produce and operate such facilities, the bill aims to attract more visits by cruise ships to Japan.

While the present law also provides for interest-free loans from the national government to private operators of seaports, new provisions will be added to fund the setup of better immigration functions. The private companies on the receiving end of funding are also expected to recruit businesses to open in new retail and distribution areas of ports, such as operators of duty-free shops. While such details as the maximum amount of the loans have yet to be ironed out, the share of national government funds allocated to retail facilities varies between 10 and 40 percent each year. The duration for repaying the loans in such cases is typically about 20 years.

According to MLIT data, 174,000 people entered Japan on cruise ships in 2013. Since then, the number of cruise visitors has more than doubled annually, with the one-year figure last year having surpassed one million in early December. This has led to the realization that wharfs and other coastal facilities will need to be upgraded to meet new demand.

Up to now, local governments have been hard-pressed to supply more funding, in part due to passenger facilities’ low profitability—not to mention endemic shortfalls for funding other local projects. The ministry, however, is confident that by harnessing the capital and knowhow of private enterprises, it will not only improve ports’ profitability, but also make the destinations more appealing to cruise ship passengers, thereby attracting more visitors to Japan’s shores.

From the perspective of developing local economies, improved port facilities are attractive in many ways. Along with additional income from port and usage fees, visitors who go ashore are expected to spend money on meals, shopping and so on while docked in Japan.

Last year Japan had more than 1 million cruise visitors.

Last year Japan had more than 1 million cruise visitors.

In a study by Kobe City, each visit by an ocean liner with a capacity of 4,000 passengers brings economic benefits of roughly ¥140 million. As more ships pay visits to ports other than the two largest urban concentrations in Kanto and Kansai, it is anticipated that revenue from such ships will be distributed more evenly around the nation.

Keizaikai magazine
In Japan . . . credit card transactions only account for about 14 to 15 percent of consumer spending.