Golden Goose

Category: Commentary

  • Are people in Japanese Rich? Poor?

    Are people in Japanese Rich? Poor?

    This question comes up in online forums fairly often in different forms. One of the more common forms is something like “Is 250,000 JPY per month salary enough to live in Japan?”.

    The answer isn’t so simple.

    One way people might try to answer this naively is to simply use an exchange rate converter. There are two main problems with this:

    1. The cost of living in Japan may be very different than other countries, so a simple number won’t help you understand if an amount is high or low just by comparing it to another number.
    2. The taxes and social insurance schemes in Japan are also potentially very different than that of other countries you might be used to.

    The first thing to do is to try to figure out how much would actually remain from your potential paycheck. You can use the site below to get an estimate:

    https://www.htm.co.jp/calculators-monthly-payroll-japan.htm

    250,000 per month is fairly low, so not much taxes or social insurance will be taken, and the estimated take-home pay is 194,740 JPY per month.

    According to Study in Japan, the average monthly cost is 130,000 JPY in Tokyo.

    https://www.studyinjapan.go.jp/en/life/cost-of-living/

    That means you would have almost 65,000 left right?

    Well, but this is an average budget for students. Housing is listed as 41,000 – but assuming you don’t want to live at a dorm, you could easily pay twice that for a one bedroom apartment. In fact, you could pay 4 times that much if you want a swanky apartment right next to a major station.

    This budget also assumes 32,000 JPY per month for food. That is 100% doable if you are eating rice and drinking water, but I personally spend over twice that much.

    It might be more useful to see how much things cost in relation to other countries. Numbeo is one site that is good for that.

    https://www.numbeo.com/cost-of-living/in/Tokyo

    You can see from the numbers on this site that Tokyo is 44% less expensive than NYC, and in particular the rent is 74% less expensive – this is despite Tokyo being a much larger city. What this really means you could live as comfortably in Tokyo as you could in New York on half of the New York salary.

    Then there are the non-monetary differences:

    • Tokyo generally has nicer and cheaper public transportation than NYC
    • Tokyo’s trains and subways do not run 24/7
    • Tokyo generally is safer and has less crime than NYC
    • There are many cultural differences
    • Tokyo has many more colleges and universities than NYC
    • Gas and Electricity is more expensive in Japan
    • Internet is better and cheaper in Japan
    • Tokyo has a many more inhabitants, but has a lower population density since it is larger and more spread out
    • Tokyo is in general much quieter than other major cities. For example, honking is only for emergencies, blaring music is not tolerated, etc.
    • Rent and property prices are much cheaper in Tokyo
    • Tokyo is hot and humid much of the year compared to NYC
    • There is much less poverty and homelessness in Japan in general, including Tokyo
    • There is much less drug use in Japan
    • Interest rates are lower in Japan
    • etc.

    Most of the above is also true when comparing against other major world cities in developed countries such as Hong Kong, London, Paris, etc.

    On the other hand, Tokyo is of course expensive compared with cities in the developing world such as Delhi, Bankok, Manilla, etc. – although salaries are lower in those cities.

    One official statistic I could find listed the average salary in Tokyo as 369,304 JPY per month in Tokyo. Assuming no dependents, this would leave roughly 286,719 JPY per month to spend. Assuming you spent 100,000 JPY on Food and sundries and 120,000 JPY on rent and utilities (including cell phone), it would leave you with over 66,000 for savings, going out, etc.

    This is a reasonably comfortable existence in a city that is safe and convenient, but by no means “rich” in comparison with the average quality of life in other first world countries.

    On the other hand, 10,000,000 JPY is usually what is considered to be “six figures” in Japan. This used to be more than $100k USD, but at current exchange rates it is considerably less when converted to USD – but this doesn’t matter so much if you are spending the money in Japan. If you make this much, you are earning 833,333 JPY per month. Since this puts you in a high earning bracket, your deductions for taxes, pension, and social insurance go up considerably, but you will still net about 600,000 per month.

    If 250,000 is tight and 369,304 is average, then 600,000 after taxes and social insurance is huge. Granted, it doesn’t mean you are super wealthy – Tokyo is an easy place to blow a lot of money in a short time buy buying brand goods every month or partying every night – but you can easily live comfortably while still saving and investing a lot of money – or you can have a relatively lavage lifestyle.

    All of this has been about Tokyo – but other places in Japan are actually cheaper, of course, and usually with lower salaries as well. Japanese people aren’t in general rich or poor, as income inequality is better in Japan than many places in the world – but the costs of many things are lower, so if you made the same salary as in another major city in a developed country such as NYC, HK, or London, or San Francisco, you might feel rich.

    You can enter various city names into the sites below to perform comparisons. What you see might surprise you:

    https://versus.com/

  • Suica Renaissance Vol.1 2025〉》2028

    Suica Renaissance Vol.1 2025〉》2028

    If you’ve been around Japan Rail stations in Tokyo this weekend, you may have seen the “Suica Renaissance Vol.1” posters around.

    Since pretty much everyone in and around uses Suica (or PASMO) at least to ride the train – and often for much of their shopping – this seemed like something to investigate.

    The Original System – Past and Present

    Originally Suica was introduced to replace paper tickets. Tokyo Metro had mostly migrated from paper tickets to magnetic cards called Passnet. Passnet cards were cheap, and could only be used a limited number of times. They worked much like the old public telephone cards, and needed to be fed into the ticket gate machines.

    Japan Rail had the idea to use more expensive “IC Cards” that could be read wirelessly and could be “tapped” on the ticket gate instead of being fed through them. This meant they could be used without taking them out of your wallet or case, and they could be read and processed much more quickly. The goal was a card that could be read in 0.1 seconds. That may sound incredibly short, but imagine you have 60 people in front of you trying to get out of the station. If every card took an entire second to read, people would be pausing and waiting as they exited, and it would take an entire minute of standing in line. There are often way more than 60 people, so you could imagine people needing to wait several minutes at the ticket gate. Of course you could add more ticket gates – but ticket gates take up space and are expensive. JR wanted to operate with fewer gates, so they needed a faster “ticket”. Sony came to the rescue with their IC card technology called “Felica”. JR used this as a basis and released their “Suica” branded cards around 2001.

    Suica cards are encrypted and the value is literally stored in the card, which means there is no internet needed for the ticket gates to verify the balance, etc. This is one reason why Suica cards are much faster than contactless credit cards, f.e. Visa Touch, etc. – There is no need to contact any type of central server in real time.

    There are basically two ways that Suica cards can work:

    1. There is a stored monetary value (“Stored Fare”, often abbreviated to “SF”).
    2. There is a stored commuter pass (The ticket allows commuting between two stations for a limited amount of time. This can be from 1 month up to 6 months.

    Commuter pass usage

    When you enter a train station, the ticker gate can check whether your card has a commuter pass that includes that station. If so, it beeps once, records your entrance on the card, and does not deduct any value.

    When you exit at your destination, the ticket gate at that station performs a similar check. If that station is also within the range of your commuter pass, then it lets you exit – again with a single beep and without deducting any payment.

    Stored Fare Usage

    If you enter a train station that is not on your commuter pass (or you don’t have one), then the ticket gate emits two beeps, deducts the minimum fee, and records where you entered.

    When you exit at your destination, the ticket gate there will check where you got on, calculate the remaining fare, and deduct the balance required form your card.

    All of this happens lightning fast, and again without requiring central servers or the internet. This also makes it very resilient to service outages.

    Shopping

    JR started allowing you to use Suica to buy drinks at vending machines inside JR stations, and before long, you could use Suica to pay for everything at any store inside any JR station. Suica is also accepted today at most convenience stores and many major retailers, taxis, etc.

    SF Charging and commuter pass purchase

    Before you can use a Suica card, you need to charge it or purchase a commuter pass. Typically, when you buy the physical card, it costs 2,000 JPY, and it comes with a 1,500 JPY charge. 500 JPY is a “deposit” (which is the cost of the card itself). Charging can be done at ticket machines, convenience stores, and many ATMs. The maximum balance you can store on the card is 20,000 JPY, though you can charge it and use it as much as you like within a month.

    You can opt to just charge the card with cash, which well let you ride anywhere you like, so long as you have enough money. You can also of course make as many purchases as you like.

    If you ride the same route a lot (to school or work, for example), you can get a commuter pass, which allows you to pay a set amount for unlimited travel between two stations. This is typically significantly cheaper than paying via SF, assuming you are commuting 5 days per week.

    Cross Service Compatibility

    Before long, JR stuck a deal with Tokyo Metro and other train and bus companies to allow the use of Suica cards on the Metro, Keio line, and many busses. In exchange, PASMO could be used on Japan Rail trains, as well as Tokyo Monorail, etc.

    Further, Japan Rail East made a similar compatibility deal with Japan Rail West, allowing the use of ICOCA in Tokyo and Suica in Kansai.

    This was possible because everyone was basically using the same Felica technology from Sony.

    My Suica

    Since you don’t need to show any ID and can charge with cash, Suica cards are totally anonymous. There is a serial number to identify each card, but if you don’t tell JR who you are, then they don’t know. This means that unregistered cards have the same characteristics as cash. If you lose your card, anyone can pick it up and use it. This is great for privacy – but not so great if you lose your card. JR allows you to register even non-commuter cards with your name and phone number as an option, so that if you lose the card, you can report it to JR. They can deactivate and re-issue the card for you in that case.

    (Although we mentioned above that a central server is essentially not necessary, there are in fact central servers that communicate with the ticket gates in the background to do things like fraud detection, statistics gathering, and blacklisted cards can be synchronized to ticket gates as well to prevent the use of lost or stolen cards).

    View Card

    Japan rail introduced “View Card”, which is a credit card with Suica functions. The card functions like a normal JCB or Visa card, and also as a normal Suica card. A new special feature was introduced – the card can be configured so that whenever the balance drops below a certain value, it will be charged next time it passes a JR ticket gate. For example, you can set your View Card to charge 5,000 JPY every time the value drops below 1,000. (You need to pass a ticket gate for the charge to happen, since the ticket gate is what is charging your card). You can configure the charge amount to be higher if you often use your card for things like grocery shopping, or lower if you only use it to ride the train.

    JRE Points / Suica Points

    JR Introduced several point systems, for Suica, atre, etc., but they have all been merged into JRE points now. Basically, you can earn points from shopping in atre and other shops inside JR, points for paying for things with View Card, points for paying via Suica, etc. These points can be used to make purchases, or to charge your Suica. This is one of the better point services, since the points are as good as cash, and can effectively be used wherever Suica can be used.

    Mobile Suica

    Even before smart phones became popular, JR introduced the “Mobile Suica” app for Japanese feature phones. This app required that you have a Japanese phone that contained the hardware to emulate Felica cards, and as far as ticket gates know, such phones are just normal Suica cards.

    Once you installed the Mobile Suica app, you could charge the virtual Suica card on your phone at the Convenience store and some ATMs (Some ticket machines too, more recently) – but now there was a new feature – you could charge the virtual Suica card via credit card as well. (The number of cards that could be used was originally very limited since obviously JR wasn’t going to pay fees to credit card companies for this).

    This meant you could use your phone for shopping and riding the train, and charge it without carrying any cash.

    Once Japanese companies like Sharp, Kyocera, Fujitsu and Sony started making Android phones, JR developed an Android version of Mobile Suica – Note that this was long before Google Wallet was released.

    The first iPhones released in Japan could not support Mobile Suica since Apple refused to implement Felica technology. After Samsung, Google, and others started releasing phones supporting Felica (Now branded as “NFC Type F” for international use), Apple finally caved in since their market share would be limited in Japan otherwise.

    One of the interesting features of Mobile Suica is that you can have multiple cards in one phone. Recent phones have support for 5 or so cards, which can be a mix of Suica, PASMO, ICOCA, etc.

    Finally, there are numerous apps that will allow you to read Suica (and similar) cards using a phone. You can see the recent travel, charge, and shopping history. Note that shopping history only shows amounts, not store names or locations.

    Current Limitations

    Since you can only store a maximum of 20,000 JPY, basically Suica can’t be used for any purchases over that amount.

    Since you need to charge before you can spend, it can be a minor pain for mobile Suica users, and a major pain for physical card users if they want to buy something over the card’s value. (I also see this as an advantage, since it is good for budgeting).

    In order to accept Suica payments, you need to have the proper equipment. There are no private person-to-person payments.

    In order to use Suica, you need to have a phone which has the proper hardware, or a physical card.

    The New system – Suica Renaissance Vol.1

    Basically, JR plans to introduce numerous new features. It isn’t clear whether some old features will disappear or not. For example, whether IC cards will be supported forever, whether Suica will remain anonymous, etc.

    Local Services

    • Extension of Compatibility – JR wants to leverage Suica to other transportation providers such as ride sharing, on demand busses, etc.
    • JR wants to let you link your MyNumber card to allow additional services (presumably from local governments).
    • Let you track family members (There is already a service called Mamorail, which can send email notifications when your children enter/exit ticket gates – so this could be an extension of that).
    • Allow you to accept payments from localities. This may refer to municipal payments.

    Payment Services

    • Revitalize localities through utilization of location limited value – I think this means creating balances like “Yokohama Money”, which can only be used in that area.
    • Allowing person to person payments for things like new years presents, etc.
    • Allowing purchases over 20,000 JPY. (It was mentioned that this would be through QR Codes, which is interesting – so they would have a new feature in their app which looks somewhat like PayPay and similar apps).

    Transport Services

    • Ability to ride the train without tapping
    • It will be possible to use Suica anywhere within Japan Rail East area by using location information. (This implies that they will somehow use GPS information to let you pay with Suica even at stations that don’t have Suica compatible gates yet).
    • Ability to pay afterwards instead of charging ahead of time.

    Note: It seems like these might not work with the current IC card setup.

    Exceeding the Ordinary – Other Changes

    • JR says it will move from an IC Card based model to a central server based model. They don’t give details on how they would make this transition while still keeping the current response time and reliability. Since that seems impossible, it may well in fact be some sort of hybrid model.
    • Travel Subscriptions that are more flexible than the current commuter passes. For example, by paying 3,000 JPY per month, you could get a 50% discount for travel not only to your main office, but satellite offices and personal weekend excursions. Also mentioned are various other perks like discounts to certain attractions, etc.
    • By changing to central server architecture they will enable “walk through” gates where you won’t need to “tap” your phone or card, and use location info to allow usage of Suica at stations without IC card compatible gates. I remember a few years back about walk-through gates being possible with the current IC card technology just by using more powerful signals and sensitive antennas.
    • Service Area Expansion – They said it will be usable in Nagano, Sendai, Aomori, Akita, etc. by 2027, in such a way that you would be able to ride from Ueno to Sendai. Also, even in areas not currently supported by Suica, you will be able to buy a “Smart Phone Commuter Pass”. (This would obviously require a smart phone with Mobile Suica, and they mentioned it would require displaying the screen). It’s mentioned they foresee using location information in the future.
    • Post-Pay – No need to charge ahead of time. It is said that you will be able to link a credit card or bank account to allow post-payment. I don’t see this as a big change to how View Card works now. Technically, it is pre-paid, but when you pass the ticket gate, it charges and then takes the minimum payment – and the actual cash payment happens later, when you get your credit card statement.
    • Payment Enhancement – It is said that by Fall of 2026, the mobile Suica app will receive a major update, allowing payments over 20,000 JPY via “Code Payment” (I assume QR code?), and the ability to transfer money between family and friends. The same update will include coupons, local value (region specific money), and more. Their intention is to make it a universal payment service in Japan (more than it already is).
    • Region specific services like local gift certificate issuing and usage, etc.
    • Fancy features using location sensing – for example, you book a taxi to pick you up “when you arrive” at a certain station. JR coordinates this to make sure a taxi is actually waiting for you when you arrive at the destination, since they know where you are. They are also planning to allow service reviews.
    • Special “Welcome Suica Mobile” for Tourists. I suppose this makes sense given the recent increase in tourists, and lack of Suica card stock. This has already launched in March, 2025, in fact.
    • Proving all this technology to other transportation vendors. They discuss a commuter pass service they started with Tokyo Monorail in November of 2024, plans to roll out things more, and then eventually overseas.
    • They have a list of their goals, divided into what they plan to have complete by 2028, and which things will be done “within 10 years”.

    Thoughts

    Obviously some people at JR have big plans – but they are biting off so much at once. I think the App update will happen, and they will be able to easily pull off QR Code payments and person to person transfers. I think they could steal market share from PayPay since they will offer essentially the current features of Suica plus those of PayPay as well – but these features would presumably not work with physical cards, only the mobile app.

    Things like regional currencies seem fairly easy too.

    Using location information and such seems a little more pie in the sky. I don’t think most people will want to give the Suica app access to their location information all the time, and even if they do, how would it know when you are riding the train as opposed to just say, riding bike along the train tracks?

    It will be interesting to see what happens!

    Link

    https://www.jreast.co.jp/press/2024/20241210_ho03.pdf

    https://livejapan.com/en/in-tokyo/in-pref-tokyo/in-tokyo_train_station/article-a0005633

  • Has Japan become poor?

    Has Japan become poor?

    Ever since the bubble in the 80s, people in Japan have been saying how they are poor now.  Sure, compared with the bubble period, the average income has decreased – but by definition, that’s always going to be the case with any bubble.  

    In checking figures, I am purposely choosing a measure that makes Japan look poorer than it is.   That is Annual Household Income Per Capita in USD.  Why is this measure pessimistic? 

        Well, Japan has a lot of single earner households, so looking at the household figure will make this look lower for countries like Japan, and better for countries that have multiple income earners.  What’s more, many Japanese households have extended family members like grandparents living together with the family which lowers the number further.  This is still to some extent fair, since after all, all of the family members need to eat.  

        Secondly, the yen has been weak against the USD lately, which means that these figured will look lower than the actual drop in purchasing power due to inflation.  Again, this figure is not completely unfair since many goods for sale in Japan are purchased from overseas, and some of those are paid for in USD.  On the other hand, many goods are produced domestically, so the exchange rate doesn’t matter as much for those.  

        The average Japan household income per capita in 2024 was $15,500 USD.  (Compared with $22.7k in 2012 and $14.8k in 2002).  

        For reference, here is the same number for the following countries:

    • China: $4,805
    • France: $28,072
    • Germany: $33,631
    • Malaysia: $5,731
    • Mexico: $3,690
    • Singapore: $38,976
    • South Korea: $19,230
    • Switzerland: $60,075
    • Taiwan: $16,605
    • Thailand: $3,740
    • UK: 34,805
    • USA: $40,722

    Looking at this, Japan is well above most other countries in Asia, but loses to Korea and Singapore, and just barely to Taiwan.  European and North American countries are quite a bit higher.

    Looking at a more forgiving number, the average salary in Japan, the number is 6,200,000 for 2024, which works out to $39,818 using the exchange rate from 2024-May.  The number is 6,400,000 for 2025, which works out to $44,471 at current (June 2025) rates.  

    Using the 2024 number, you can think of this as being basically $62k USD when purchasing local goods, and $39k when purchasing foreign goods.   Since most people purchase a mix of local and foreign goods the reality is somewhere in the middle.  

    When you divide by the number of family members per household, the number drops to the $15k USD number listed above.  For most families, the most important components of that will be housing and food.  

    Housing in Japan is not directly affected by exchange rates, and is relatively stable.  Even in Tokyo, housing is also very much cheaper than housing in large Western cities.  Medical care is also inexpensive compared to countries such as the US.  

    This means that even with a relatively lower salary, there may actually be more disposable income.

    Having said that, there has been mild inflation in the last year, and certain goods have risen more than average.  To consumers not used to yearly inflation, this has come as a shock.  People tend to notice the things that have gone up more than the average, and not notice the things that have actually dropped in price.  

    Since it isn’t fair to compare these numbers directly when the cost of living is significantly different, there is a concept called Purchasing Power Parity, which allows you to adjust the numbers for the cost of living in each country.  When you do that, you’ll see things quite a bit differently.  

    In this chart, you can see that the adjusted household income is more like $20k after adjusting for purchasing power.  This still doesn’t mean that people are living half the lifestyle they would have in the US, because the conversion rate doesn’t fully account for transportation and housing being cheaper – or interest rates being so much lower in Japan.  

    Many companies have started instituting salary raises based on cost of living, but it will be a while before these policies are widely in place and keeping up with inflation.  

    In the meantime, the situation continues to be that the average Japan is “poorer” than they were during the bubble years, but not poor by any means.  The last two years have seen inflation after over a decade without it, which will make a lot of people feel a bit poorer for a few years while they get used to the change.  This is mainly relevant to the average person with respect to food prices.  

    Many people in Japan seem convinced that Chinese people are rich.  This comes from several observations:

    1. China surpassed Japan to become the world’s 2nd largest economy by GDP in 2008 (This is based on perhaps suspicious figured provided by the Chinese government, but even if the real date was 2009 or so, it’s certainly #2 by now).

    2. Japanese people see rich tourists visiting Japan all the time and spending a lot of money.  

    What people don’t necessarily realize is that comparing GDP is not meaningful when countries have a population difference of around 10 times.  In fact, having a population that is 10x larger with around the same GDP simply means the average GDP per capita  of China is roughly 10% of Japan’s.  

    Using the latest numbers (October, 2024) of GDP per capita, China has $13,870 while Japan has $35,610.  These numbers don’t add up, but one thing is clear, the average income per person is much lower in China than in Japan.  The numbers for South Korea and Taiwan are very similar to Japan, while Singapore clocks in at $93,960!  

    So yes, the numbers in China have been on the rise, and the numbers in Japan have been falling, but a large part of that is due to the unfavorable exchange rates.  These numbers will likely improve when the US lowers interest rates.  Also, note that the average income in Japan is roughly 3x that of China using most any measure.  

    The issue with China is that:

    1. There is a very large population, so even is you only look at the top 1% earners, there will be a lot of people.  Some of those people will want to come to Japan.

    2. Income inequality in China is much worse than in Japan or the US.    

    And only the wealthy Chinese people will be tourists coming to Japan to spend their money.  This is of course true in general with tourists to any country.  Add to this the fact that the weak yen has made Japan an attractive market for tourist recently, and it shouldn’t be surprising to see many visitors from other nearby Asian countries.  This is neither good nor bad, just a reality.  It does mean, though, that people in Japan shouldn’t assume that suddenly all Chinese are wealthy – because that is certainly not the case.  

    There has also been a fear in some countries, including the US and Japan, that foreigners will buy up all the land.  It seems to me that this fear is semi-valid, but the solution is simple.  Some countries, such as India and Thailand don’t allow foreigners to buy land at all.  While that seems a bit overkill, it would be easy enough to implement a  system where we only sell land to citizens of countries who also allow Japanese people to buy land there.  This would immediately rule out China, since even locals can only “buy” land from the government there for 70 years, which is technically renting.  

    Back to the point of the article.  It’s true that with the weak yen and inflation, things are feeling more expensive in the few years so – in fact prices have increased about 10% in the last 5 years.  That’s in line with the inflation rates of most developed economies, by across the board increases with salary have not yet caught up for everyone.  

    On the other hand, it’s also true that you can get a livable apartment in one of the safest and most vibrant cities in the world (and one that also happens to be the biggest), in a democratic country with a rich culture, and fantastic public transport –  for under $500 per month.  You can likewise eat for around the same amount – meaning you can live a reasonable life in the biggest city on earth even at minimum wage.  

    Data Sources:

    https://www.ceicdata.com/en/indicator/japan/annual-household-income-per-capita

    https://www.salaryexplorer.com/average-salary-wage-comparison-japan-c107

    https://www.imf.org/external/datamapper/NGDPDPC@WEO/CHN/HKG/JPN/KOR/SGP/TWN

  • Why Foreign Banks Can’t Compete in Japan

    Why Foreign Banks Can’t Compete in Japan

     As I am sure most people know, banks accept deposits from customers, and then pay interest.  This costs the bank money.

    Banks also typically lend money out for business loans, home loans ,and other types of loans on which they of course charge interest.  

    Basically, the way banks have historically made profit is that they borrow money from depositors, lend that money out, charge interest, pay some percentage of that back to the depositors, and keep the rest for themselves.  

    Here are some average numbers from the United States as of the end of 2022.

    • Car Loan – 3.3% – 5.99
    • Savings Account – 3.3% – 4.35 %
    • Standard Home Loan – 5.5% – 6%
    • Business Loans (bank) – 4.2% – 4.5%

    As an example, an average consumer might put money into the bank, which pays them 3.3% interest.  The bank lends that money out as a home loan at 6%.  That gives them a 2.7% margin.    Since the banks have many millions of depositors, many thousands of home loans, and are operating billions of dollars, this more than covers their cost for renting expensive bank buildings and paying their employees, and leaves plenty of profit for returning to investors, expansion, etc.  

    Sadly banks in the US have gotten into less honorable, but more profitable operations such as pay day loans, title loans, excessive fees, and credit cards – but we’ll leave that discussion for another day.  

    The point is: banks in the US, and in most countries, have a large customer base and a wide percentage point spread to work with.  

    So how about Japan?

    I’ll use Mitsubishi UFJ Bank as an example: 

    • Normal Deposit Account (Futsuu Yokin Kouza): 0.0010%
    • Variable Rate Home Loans: 0.345% – 0.475%

    Yes, you read that correctly: The interest rate they charge on home loans is less than half a percentage point in the most expensive case!  10 year fixed rate loans are closer to 1%, but that’s still extremely cheap compared to most countries.  

    These rates aren’t special to Mitsubishi either.  As of this writing, Sony bank charges 0.397% (if you put a 10% deposit), and SBI Shinsei Bank charges 0.320%

    What that means is that the bank has to lend out the money, collect the payments, pay their rent, employee payroll, IT fees, utility bills, taxes, pay for losses on bad loans, and then pay interest back to the depositors.  It’s no wonder the rate on deposit accounts is essentially zero.  

    If you are willing to lock your money away for a year or more, then you can get an increased rate of return, say.. 0.0020%!  

    Having to live on a margin of less than 0.5% of interest requires massive scale and low costs.  A foreign bank operating in Japan is by its very nature likely going to have a small scale and higher costs.  

    Difficult Market Conditions in Japan:

    • Low Interest Rates: Japan’s prolonged period of ultra-low, and at times negative, interest rates made it difficult for retail banks to generate significant profits from traditional lending and deposit-taking activities.
    • Intense Competition: The Japanese retail banking market is highly competitive, dominated by large domestic megabanks (like SMBC, MUFG, Mizuho) with extensive branch networks and deep customer bases.
    • Small Market Share: Despite its long history in Japan (entering in 1902), Citibank’s retail banking market share remained relatively small.
    • High Operating Costs: Despite efforts, foreign banks often faced higher operating costs in Japan compared to local counterparts, including staffing, real estate, and compliance. Operating in Japan’s highly regulated financial sector still incurs significant compliance costs and requires navigating complex local rules, especially for foreign institutions that may not have the same deep-seated relationships with regulators as domestic banks.

    Because of this, the two main foreign banks operating in Japan both closed their retail branches in the past 10 years.  

    HSBC

    HSBC closed all of their retail/consumer operations and fled a number of years back.  Their branches were simply closed as they said goodbye to their customers.  

    Cultural and Operational Mismatches: Some analyses suggest that HSBC struggled with an “ethnocentric” approach in its Japanese retail operations. This includes:

    • Language Barrier: HSBC’s internal official language is English, which created challenges for recruiting bilingual local staff and daily communication.
    • Centralized Decision-Making: HSBC’s more centralized decision-making process clashed with the more consensual, decentralized, and often slower decision-making culture prevalent in Japanese organizations.
    • Employment Practices: Difficulties aligning with Japan’s “lifetime employment” culture and the challenges of dismissing staff. (It isn’t easy to terminate employees in Japan).
    • Technical Incompatibility: Issues with standardizing global ATM and internet banking systems to meet specific Japanese market requirements.
    • HSBC had also faced global scrutiny and fines related to anti-money laundering (AML) practices, which further underscored the need to consolidate operations and focus resources on core, compliant businesses.

    Exit from Japan:

    • As part of its exit, HSBC sold its Japanese private banking business (targeting ultra-high-net-worth individuals) to Credit Suisse Group AG in late 2011/early 2012.
    • For its broader Premier and retail banking services, HSBC phased out operations, gradually closing its branches and assisting existing clients in moving their assets to other banks and financial institutions.

    In essence, HSBC’s exit from Japanese retail banking was a strategic decision to withdraw from a market where it faced intense competition, low profitability, high operating costs, and cultural/operational hurdles, allowing it to reallocate resources to areas like corporate banking and asset management where it believed it could achieve better returns globally.

    Citibank

    Citibank also operated in Japan, essentially catering to rich foreigners, and also closed.  In many retail markets, including Japan, Citibank was a relatively small player compared to dominant local banks. Competing effectively in a saturated, low-interest-rate environment like Japan’s retail banking market was challenging and didn’t align with Citibank’s desired returns. This was not just to profit crunch, Citibank Japan was punished by the Japanese government multiple times for dealing with the Yakuza, as well as deficiencies in its governance, internal control, and business management systems.

    In the case of Citibank, though, SMBC Trust Bank took over the operations, absorbing Citibank Japan into  SMBC Trust Bank in 2015, and branding it “Prestia”.

    Because of this history Prestia is one of the only banks  where most everything is available in English, and one of the only banks to charge a monthly fee just for having an account (Depending on your balance).  

    Strategic Advantage for SMBC Trust Bank:

    • Acquisition of Desirable Assets: For SMBC Trust Bank, acquiring Citibank Japan’s retail operations was a strategic move. Citibank had a base of affluent, globally-minded customers, many of whom were expatriates, with significant foreign currency deposits and a preference for global financial products. This niche was attractive to SMBC Trust Bank, which aimed to expand its private banking services and enhance its foreign currency funding base.
    • Expertise and Brand: SMBC Trust Bank also gained Citibank’s know-how in foreign currency investment management, product development, and the established “PRESTIA” brand, which was well-known among a specific segment of the Japanese and expat population for its global services.
    • In essence, Citibank’s exit from Japanese retail banking was a calculated decision to shed a less profitable, high-compliance-cost segment in a challenging market, allowing it to reallocate resources to more lucrative global wealth management and institutional businesses where it held a stronger competitive advantage. The repeated regulatory issues in Japan likely accelerated this decision.
  • Is Japan a Cash Society?

    Is Japan a Cash Society?

     One of the myths you will often hear is that Japan is a “Cash Society” – but is it true?  And if so, what does that even mean?  It’s one of those things you hear all the time, but rarely see any hard numbers presented.  

    I take it to mean that Japan is a country where most people use paper money and/or coins to pay for most things most of the time.  A more extreme interpretation might be that you can only use cash to pay for many of your day to day expenses.  If so, I don’t think it’s true at all.  

    There are numerous types of payment you will see in every day life:

    • Cash (paper money and coins)
    • Direct Debits (From bank accounts) – Mainly used for utility bill payments
    • Direct Deposit – Mainly for payroll and refunds
    • Transfers between bank accounts – Often used to send money to friends, pay rent, etc.
    • Contactless IC payment – Including Transportation cards such as Suica, ICOCA and Pasmo.  These can be prepaid (such as the transportation cards mentioned above), as well as cards like WAON, EDY and Nanaco.  Post-paid/realtime standards all exist, including iD and QuickPay.  These can typically be in the form of physical cards or emulated cards on smart phones.  For example, you can get a physical Suica card, or use Mobile Suica on your phone.  These are typically used for small purchases and transportation, and use Sony’s Felica standard almost exclusively.  
    • Credit Cards / Debit Cards – These are Visa, Mastercard, Amex, and JCB.  These use magnetic stripe, IC Chips (with contacts), and occasionally contactless (NFC) ICs, as in the example of Visa Touch.  Contactless payments via NFC is not so popular in Japan, as the above mentioned standards like iD and QuickPay are faster and already entrenched.  The advantage of these cards is that they can typically be used at overseas merchants.  
    • J-Debit – Allows you to use a cash card from a bank to pay at the POS.  
    • QR Code / Bar code / Mobile App payments – These hhave only become popular recently, and include things like Paypay, Yucho Pay, Rakuten Pay, au Pay, etc.  

    You may have noticed that Checks and Money Orders are not on this list.  Technically the both exist, but they are not common for consumer use.  

    Salary Payment

    While the law technically stipulates that companies must pay in cash for employees who request this, most companies in practice require a bank account to set up direct deposit.  This means that for most employees, at least at large companies, they don’t have paper money coming in, and need to go to a bank branch or ATM in order to withdraw cash if needed.  

    Now let’s consider common places where you might spend money, and what payment forms are accepted at each:

    • Convenience Stores – Basically all types, excluding J-Debit.  Using a credit card is probably a slower method at many stores.  Many clients use cash, but Suica and iD are also very popular.  QR Code payment has become more popular in the past few years.  
    • Resteraunts – Most proper resteraunts will accept credit cards, or cash.  Some will accept Suica and other IC cards, or QR-Codes.  
    • Online shopping – Most all online shopping sites will accept credit cards, but often will accept bank transfers/direct debit, and some (such as Amazon) accept mobile Suica.  
    • Supermarkets – (e.g. Ozeki, Summit, Queens Isetan, Kaldi, MyBasket, etc) : Almost all will accept cash, credit cards, Suica, iD, etc.  Many will accept QR code payments.  
    • General Stores – (i.e. Donkihote, Tokyu Hands) : Most will accept most of the payment types listed above.
    • Drug Stores (e.g. Matumoto Kyoshi, Koko kara Fine, Tomod’s) – Most will accept most of the payment methods listed above, including cash, credit, Suica, etc., and QR code payment methods.   
    • Family Resteraunts (i.e. Jonathan’s, Saizeria, etc.) – Most allow most of the payment methods listed above.    
    • Home Centers (i.e. Shimachu Homes) – Cash, Credit, and depending on the chain, other methods such as Suica, iD, QR code payments, etc.  
    • Delivery (i.e. Dominos, Demaikan, Uber Eats, etc.) – Credit Cards, Cash, dPay.  
    • Rent – Typically bank transfers, some larger companies may be able to set up direct debit.  Some smaller landlords might also accept cash.  
    • Tax Bills, Utiltity bills – These can typically be set up to be deducted from your bank account or charged to a credit card automatically each month.  If you have not set these up, you will receive an invoice in the mail with a bar code.  These can be paid at convenience stores in cash, with Nanaco at 7-11, and with various other methods, including apps from the banks.  
    • Electronics Stores (i.e. Bic Camera, Yodobashi Camera, Yamada Denki, etc). – Typically accept any method, including J-Debit.  BIC even accepted BitCoin for a while. 
    • Furniture stores (i.e.  Nittori, Ikea) – Most methods.  Cash and Card for sure.  
    • Dive Bars, very small cafes and resteraunts – Cash, sometimes more options.
    • Small corner vegetable Sellers – Cash, maybe QR Code payments.
    • Vending machines – Cash (coins or bills), Suica.  
    • Taxis – Most in the city will accept Credit Cards, Cash, Suica, iD, and sometimes other methods.  Many of the larger companies also may accept barcode payments and/or have their own app.  Some are operated by individuals, and often these will only accept cash.  

    I think by now you get the point – most things can be paid without paper cash.

    For eating a quick meal at a family restaurant, or a quick trip to the supermarket or convenience store, cash is accepted, but most people pay by e-money (Suica, iD, or similar), or by QR Code (PayPay, au Pay, or similar).  These are faster and more convenient than cash or credit cards, and the small amounts are handled efficiently.  

    For charging at a fancier resteraunt, electronics store, furniture store, or general goods strore, e-Money and Bar Code payments can still be used, but for big ticket items, credit cards / Debit cards tends to dominate.  For example, Suica (and other transportation cards) can only store up to 20,000 JPY at once, so you couldn’t use it to pay for a 500,000 JPY TV or bed.  Nanaco is likewise limited to 70,000 JPY.  Most bar code payment methods also have a limitation, whereas credit cards and cash have no practical limits.  

    Small Shops

    Some very small sellers like the mom & pop vegetable store on the corner don’t accept anything except cash, or may accept only a bar code method like PayPay.  This is because they don’t want to pay any transaction fees, and don’t want to deal with a bank or get expensive cash registers or payment terminals.  Even Suica requires a payment terminal, whereas systems like PayPay only require a phone or a bar code sticker.  The sign up process is easier, and the introductory fees are lower. 

    QR Code / Bar Code Payments & Consumers

    What said, why has there been a boom in QR code style payments other than for small merchants?  On the consumer side, QR code payments are generally less convenient than using something like Suica – but in order to try to gain market share, the QR code/bar code companies have been running campaigns for the last year or so, offering 2% cash back and the like.  I suspect that once the promotional money for these campaigns runs out, the popularity will dwindle somewhat.  

    The Suica Advantage

    There are a few reasons why Suica (and other transportation cards) has enjoyed such longstanding popularity:

    • Speed – Suica cards don’t need to check in with the bank, the balance is stored on the card itself.  A suica card is designed to be used at a busy turnstile, and is specced to allow 10 people to enter per second.  That means a transaction, from start to finishes takes less than 0.10 seconds.  Some readers may think “so what if it takes a couple seconds…” – but when there is a line of people behind you, you want to pay and get out.  When there is a line of people in front of you, you want them to pay and get out, not be fumbling in their wallet, counting coins, unlocking their phone and launching apps, etc.  
    • Flexibility – Suica comes in both mobile and card form, and you don’t need to unlock your phone or open any app to pay.  Neither you nor the store  need an internet connection, either.  Suica can be charged from cash, or by other methods, such as credit card.  
    • Privacy – You don’t have to register a Suica card to your name if you want to be anonymous.  You aren’t forced to give your name, address, ID, phone number, bank account, or any other information.  There is no contract to read and agree to either.  Anyone can buy a Suica card for $20, or create an anonymous Suica card in Google Pay as well.  As a result there are no restrictions on residency, age, citizenship, or anything else.  Truely anyone can get and charge a card any time they like.  You can of course register accounts for safety and convenience if you like.  
    • Ubiquity – Pretty much every person in Japan has a Suica card, or compatible transportation card.  If you have it anyway, then it’s convenient that you can use it to pay for small items.  
    • Eki (Station) – Train stations are some of the most sought after retail locations for merchants, and some of the most convenient locations for consumers to do their shopping.  There are many shopping malls in these stations, like Atre, Ekichika, and many more.  A condition of renting space is that the store much accept Suica (or Pasmo, etc).  This means even stores that ordinarily don’t accept Suica (like Starbucks) are strong-armed into accepting it at many of their locations.  As a result, when shopping in and around train stations, you can be rest assured that whatever else the shops accept, they will accept Suica for sure.
    • Usefulness – If you have some remaining balance on some payment methods and you aren’t going to use them for a while, the money is effectively useless.  For example, if you have 500 JPY left on your PayPay account, you may or may not be able ot use it.  Paypay is accepted many places, so you will probably use it, but if you have PayPay, dPay, au Pay, Yucho Pay, Rakuten Pay, etc., and have $5 on each… some may sit unused for a while.  You may decide to transfer the money back to your bank account in those cases – but with Suica, it’s guaranteed that you can use it to ride the train, subway, or bus, which most everyone does from time to time.  
    • No Mobile Requirement – Suica is supported on mobile devices, but as mentioned above physical cards are supported.  The phones simply emulate a physical card, which means they don’t even need to have battery or internet to use an existing balance or charge from cash.  

    At any rate, I have tried most of the payment methods out there, but I spend almost all of my money via the following:

    • My Bills are charged to my JCB credit card or direct debit from my bank account.  
    • I pay paper invoices by Nanaco (but I charge this with cash once per month)
    • I have an iD/Visa debit card, so I often use iD to pay at places that accept it
    • I use Suica around the station and places that don’t accept iD (f.e. Kakuyasu)
    • I use the visa debit card’s card number, or my JCB credit card’s card number for shopping on Rakuten, Merucari, Yahoo Shopping, Amazon, and other online purchases (Using Suica to pay online is a minor hassle)
    • I use cash sometimes at small bars… (Though some accept PayPay these days) and cash only supermarkets

    Actually, as a general rule, if a physical store doesn’t accept Suica or iD, then I figure they must not want my money, and I don’t generally shop there.  The major exceptions would be dirt cheap cash only marketplaces.

    I really don’t use EDY or QuickPay, because I have found that most places will accept Suica or ID.  EDY is on the way out anyway. I never use Visa Touch because every place that accepts it accepts iD or Suica.  I don’t use the visa (chip) feature of my card if the shop accepts iD, which most do.  JCB isn’t supported by all overseas web sites, so I use Visa in those cases.  

    At any rate, I only very rarely use actual cash, and I don’t use often PayPay or similar.  (I have set up some of these apps, such as au Pay and Yucho Pay, but don’t really have an incentive to use them).  

    So the idea that you need to use cash for most day to day expenses is simply false.  You can most likely pay for your coffee, groceries, cleaning supplies, online shopping and most everything else you want using some combination of Suica/iD, Credit/Debit, and bar code/QR Code apps.  

    If you don’t spend a lot of time in dive bars and buy all your groceries from mom & pop corner shops, you aren’t likely to need to carry much cash.  That said, given that there are some places that only accept cash, I would always keep at least 2,000 JPY on me  – just in case.  

    This is perhaps different than what I have seen in some other countries, where everyone accepts cashless payments.  For example, it is well known that these days in China, WeChat pay or Ali Pay is seemingly accepted even at the smallest food stalls and similar.  While everyone acts like this is some modern revelation, debit and credit cards are seemingly accepted even for the smallest payments in the US and some other western countries, while many southeast Asian countries allow you to pay money through the mobile operator via SMS.  Meanwhile, Japan has had Suica and Mobile Suica since well before WeChat was a gleam in the creator’s eye.  

    Conclusion

    According to Statistica, 42% of consumer retail payments were cashless in 2024 – but this focuses on retail payments, and does not include things like salary, rent, and loan payments. Since rent and loan payments usually happen “cashless” in the sense that cash is transferred by bank transfer, but no paper money is handled. Still, this is low compared to the 72% of cashless payments at retail in the USA – but the USA is known for having debt-ridden consumers, while Japan is known for having a large number of “silver” riders.

    If we are talking about actual paper cash, there are very few things you need that to pay for – which means that regardless of what other people do, you can live your life mostly cash free.

    I should remind you that while cashless payments do have many advantages, numerous scientific studies have shown that when people spend money with cashless payment methods they tend to spend more money overall. This is especially pronounces with credit cards, and less so with debit cards. My recommendation would be to suppress this effect by using prepaid cards with small balances for only a week’s worth of shopping instead of a credit card or debit card linked directly to an account with a large balance. You want that feeling of “I wonder if I have enough left on my card to pay for this”, since it simulates the same feeling you have when you ask yourself whether there is enough cash in your wallet or not.

    References: