Japan is shifting away from its traditional “cash is king” approach as cashless payments surged from 13.2% in 2010 to 42.8% in 2023, according to government data reported by Reuters.
Despite lagging behind other nations in payment technology, the growing use of digital transactions has prompted the Bank of Japan (BOJ) to explore a central bank digital currency (CBDC). In 2023, Japan launched a CBDC pilot program, making it one of the largest economies to reach this development stage.
The BOJ is collaborating with private firms and government agencies to design and establish the infrastructure for a digital yen. BOJ Executive Director Kazushige Kamiyama noted that while banknote issuance remains high, cash usage may decline significantly amid increasing digitalization. He emphasized the importance of creating a retail payment system that is convenient, efficient, universally accessible, and secure.
BOJ Deputy Governor Shinichi Uchida described a CBDC as potentially “a critical piece of infrastructure” for the future of Japan’s payment and settlement systems. However, he does not expect cash demand to decrease substantially in the near term.
Globally, cash usage continues to decline. In Latin America, in-store cash payments fell from 67% in 2014 to 25% last year, with projections estimating a drop to 17% by 2030, according to PYMNTS Intelligence. In the United States, the Treasury Department plans to phase out the penny, citing production costs nearly four times its face value, resulting in annual losses exceeding $56 million for the U.S. Mint.