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Japan Moves Towards Cashless Society with Salaries Now Payable to Digital Platforms

Asia Pacific has experienced a dramatic increase in cashless payments during the pandemic years. In 2020, some countries showed significant percentages of purchases were cashless, such as South Korea (93.6%) and China (83%).  In contrast, Japan rose from 13.2% in 2010 to 32.5% in 2021.   The Japanese government hopes to promote an increased usage of the digital economy.

According to Japanese labor standards laws, employees are to be paid in cash.  However, companies are permitted to pay to an account in a financial institution. Under the proposal to be implemented in 2023 an employee will be able to have salary directed to a cashless account, up to a cap of Yen 1 Million (approximately US$7,000), with any excess to be directed to a bank account.

Popular cashless platforms in Japan, such as PayPay and Rakuten Pay, will be required to meet certain criteria and governance to participate in the program. However, the Japanese Trade Union Confederation has expressed concerns about the proposal, stating “Wages support workers’ lives, and therefore their safety and certainty must be guaranteed.  We can’t easily accept something with questionable safety”.

Salary payments from small employers have been allowed in China for some time, with the Alibaba conglomerate cashless pay system ‘Alipay’ a main player.  The benefit for participants is the direct payment of salary into the ecosystem commonly accepted by smaller retailers, avoiding the need for cash transfer and fees charged by institutions.

Outlook: The digital economy has transformed the way consumers and retailers operate, and it is therefore no surprise to witness the transition of salary payments to the cashless platform.  A recent survey in Japan suggested that only 30% of companies were prepared to offer this as an option to their employees.  However, just as decades ago we witnessed the change from the cash pay packet to direct bank transfer, we can expect the demand for this salary payment approach to only increase. 

Published on: October 12, 2022

Authors: Michelle Swinden

Topics: China, Japan & Asia-Pacific, COVID-19 Employer Issues

Michelle Swinden

Executive Director, Asia-Pacific, HR Policy Global

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Contact Michelle Swinden LinkedIn

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