Hey guys,
inflation != deflation

Eric M. Jones

Honda, Toyota, Panasonic, Nikon and Sony already HAVE all our cash. So it is in our best interest to ban cash and keep their cameras, computers,TVs and cars.

This makes sense to me. "All your base are belong to us!..." Hah!


Now panhandlers will have card readers to collect their money.


Hey guys,

I think you missed the point here. This is about the liquidity trap Japan has been caught in for many years.

The idea of removing cash from the economy is a way to actually implement Greg Mankiw's idea of negative nominal interest rates.

No cash = no cash hoarding during deflation. It is the only means to actually implement negative nominal interest rates.

This is not a way to stave off inflation. It is a way to cause inflation.


So by abolishing cash, and requiring everyone to store their wealth digitally, banks would have the capacity to charge an interest rate of -4%. So your account of 100,000 yen on 31 December, would be 960,000 yen on 1 Jan???

So... Why on earth would anyone keep money in the bank other than for immediate spending requirements? This sounds more like a clarion call to Black Marketeers, rather than an end to inflation.

(Buy Gold and Silver now, just in case this goes through)


Would that make this "dismal science fiction"?


I'm not an economist, so I can't really weigh in on the merits of a nominal interest rate of -4% brought about by a cashless system. However, I am in my 20s and never use cash unless absolutely required by some vendor (usually small businesses). All of my transactions are digital. If tomorrow we were using credits instead of dollars, my life would not change one iota. All my money is just numbers on a screen anyway...

Shay Guy

Eden of the East, anyone?


So your account of 100,000 yen on 31 December, would be 960,000 yen on 1 Jan???

860% interest rates? Talk about causing inflation.

billy bob

electronic cash is just as inflation prone as paper cash. Anyone who understands macroeconomic theory knows that. Clearly this isn't the real reason. Poster number five is very close. If you must keep cash in a bank they can charge for it. Your cash decreases slightly each year. This appears to be a plan to fight deflation. If hoarding cash results in slight annual losses there will be decrease in cash hoarding of some degree (marginal propensity to hoard?). This appears to be a way to fight deflation rather than a way to control deflation. The second reason to go to electronic cash is that it can be traced. This eliminates the black market and tax evasion in Japan. A kid can't even mow a loan for cash and not report it under an electronic system.

billy bob

correction. This appears to be a way to fight deflation rather than a way to control inflation. Poster number four said it more elegantly. However 4 and 5 forgot about the tax and black market ramifications of being able to trace every single transaction in yen.


@ 6

"So... Why on earth would anyone keep money in the bank other than for immediate spending requirements?"

That's the point. I live here and I can tell you that Japanese people keep large amounts of cash in savings accounts, insurance annuities and just plain stacks of cash sitting around the house instead of invested in - well, anything. This is one reason why Japanese corporations rely more heavily on bank loans than selling equity to fund their operations. It also gives the banks more influence over the economy.

I'm not saying that this is a good policy to implement, but it will motivate large savers to diversify their holdings - and you are probaby right in that they will move to other "safe" vehicles like precious metals. But it will also move more of that stored up savings into the broader financial markets and current consumption.

One could argue that the current Japanese practice is more sustainable - from the savers' point of view - than the Wall Street model,from a lifetime savings perspective. A higher percentage of the Japanese population is either retired or nearing retirement than the US population. It would be foolish to suggest that aging savers should increase their risk profile at a time when prudence suggests that they should be reducing it.



Is this a joke? Read that article and you will find that the idea is not serious: " may start mulling"; "in the realms of economic science fiction"; "although politically radioactive, MIGHT be feasible" (say 2 unnamed LDP members); "In theory"; "a wholeheartedly cash-based consumer society";"...unlikely...to brook anything as radical as abolishing cash."

With the popularity of cash here "16% of currency in circulation" this has to be the most unrealistic scenario one could drunkenly imagine. It ain't gonna happen any time soon if ever. Why do reporters come up with this stuff?

Andrew Draper

Most of Japan is a firmly cash based economy - a lot of shops don't take any other form of payment. IMHO it would be a lot harder technically to abolish cash in Japan than in other countries.

Syrbastyian Vzampfyier

Some people (be it a rare few) in Japan may talk about getting rid of paper and metal currency but it will never happen. Even if it does at some future date, Japan will probably one of the very last countries to do so for one very simple fact: "The Japanese LOVE paper money"

Japan is not a people who live on credit, yes most people do have credit cards but they mainly only use them for traveling overseas, Internet purchases and some use them to get points for air travel.

Also consider this fact, depending on which Bank you bank with, you can take out between $10,000 to $30,000 at an ATM .

So the comments about Japan doing away with paper money in Japan, is just dreamy ideas, in no way reflect the reality of the people in Japan and, or even most of the people in government.

That being said, there is a rise of electronic-money-cards such as Edy, Nanaco, Waon, (#)Pasmo, (#)Suica & (*)Taspo.
(#) Are really a train pass/ticket that can also be use at many shops and taxis.
(*) Is a cigarette ID card for purchasing cigarettes from vending machines, you can out up to ï¿¥60,000 which is basically $600, ignoring exchange rates.
Though all of these forms of electronic-money are only used for small purchases under ï¿¥10,000 ($100). Note anything under $100 is considered a small purchase in Japan.

I been living in Japan for 14 years, when I first arrived, I was a credit-card and debt-card person like most westerners but I have change to a cash and savings person like most Japanese.

Comparing the two: I prefer the Japanese way of saving then purchasing. I may have to wait but waiting insures that I do not buy needlessly and more importantly, I incur no debt.




They might as well use Microsoft Points, they seem pretty stable.


I don't like this one bit. It could easily give government too much power over your money and too much insight into your transactions.
Further more, an economy based on nothing but bits and bytes could make the economy even more unstable than it is already. They should rather return to the gold standard if they want to limit inflation (or deflation, as mentioned in the article).


Visit rural japan and you will see why it wont happen.

I also live in Japan, 8 years in Tokyo but since last year I moved to run a tech store in rural Japan -Oita prefecture- and i believe it wont be possible to adopt such policy in 3 years. In 2 prefectures is Tokyo and Osaka would be possible, but in the other 45 prefectures no way.


@17: That's true, but the literal tangibility of what you spend day to day isn't always tied to how actually tangible the currency is. A digital currency could be based on the gold standard, and that'd be a lot more stable than a paper one based on which side of bed Bernanke wakes up on in the morning.

Sundar Srinivasan

This is a good move by Japan. Other than economics, it also reduces the spread of black money as all transactions are recorded and it avoids the problems of counterfeit currency. But then it would bring its own set of security issues that we need to fight.