Cash is no longer king in Japan as use of coins falls sharply

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An unprecedented drop in the number of coins in circulation in Japan suggests that the country’s long love affair with piggy banks in homes is coming to an end.

According to Bank of Japan data, the national stock of coins has risen steadily since 1970, but has declined sharply on a year-over-year basis for 18 consecutive months.

This shift has been triggered by a combination of the COVID pandemic, banking fees, inflation and the rise of cashless payment technology.

The popularity of cashless payments – which some have linked to the idea that coins are considered “dirty” and carriers of Covid – Will accelerate rapidly in 2022, Cashless transactions accounted for 36 percent of all consumer payments, compared to 15 percent a decade ago.

Analysts said the public’s move away from coins could also signal a broader shift in Japanese attitudes toward savings.

The biggest decline came in the highest denomination coin of ¥500 in circulation. It is the most common coin given to children to keep in their piggy banks, a tradition that seeks to establish solid patterns of savings and delayed gratification at an early age.

Parents traditionally set aside 500 yen coins in their turn and put it in their children’s piggy banks, the contents of which are transferred to bank accounts when they are full.

But beginning last year, Japanese banks began charging anyone with large amounts of coins a steep fee of up to 1,100 yen.

Tsuyoshi Ueno, chief economist at the NLI Research Institute in Tokyo, said strong resistance to paying fees may have caused many families to stop using piggy banks and generally avoid storing money using cashless technology for small payments. are saved.

Ueno wrote in a research paper on the phenomenon that piggy banks were the driving force behind the demand and minting of 500 yen coins, so it was reasonable to assume that the reversal in savings was reducing demand.

The apparent change in behavior comes as Japan’s highest inflation in decades is challenging people’s attitudes toward spending and savings.

Years of steady growth encouraged consumers to put most of their wealth in low-yielding bank deposits. But now core inflation has exceeded the BOJ’s 2 percent target for 14 consecutive months, while wages data this week showed continued upward pressure.

Japan’s political and business world is increasingly focused on the possibility that the country is undergoing a fundamental change. An entire generation that grew up in an era of deflation is being forced to move away from rising prices, a demanding labor market and, possibly, Japan’s 24-year experiment with ultra-low interest rates.

JPMorgan economists in Tokyo said that while demand for bank deposits as a share of household assets has remained broadly stable, and the decline in the amount of banknotes in circulation was not as sharp as that of coins, the BOJ data could initiate a turnaround. Is.

“The implication here is that the drop in coin use could signal a broader shift in Japan’s cash-is-king philosophy,” said JP Morgan’s Benjamin Shatil, who explained the coin’s sudden decline in a note to clients last month. was also mentioned.