A digital currency for Japan?

Japan could soon have a digital currency of its own — and well in time for the Tokyo Olympics.

The J Coin, as this new currency will be known, is the brainchild of a consortium of Japanese banks.

Led by Mizuho Financial Group and the Japan Post Bank, the consortium hopes J Coin will achieve the following aims:

1. Break the traditional dependency on cash.

The Financial Times reports that 70% of value transactions in Japan are made using cash. This can be inefficient, resulting, for example, in a significantly high volume of cash handling fees. It also has security implications, such as that it hinders efforts in tracing the proceeds of crime.

And here’s what makes the situation even more marked: in most developed countries, cash accounts for only around 30% of value transactions. Clearly, the Japanese average is way above the norm.

2. Take the fight to Alipay.

This digital payments system from China has been making inroads in Japan. The banks are hoping that J Coin will become a serious alternative.

3. Open up a rich seam of consumer spending data.

The banks would love this, for sure. One can only imagine the amounts of data that the banks would gather, and the business opportunities these would create.

This is how the banks see it: when a user spends J Coin, the banks will be able to keep track of her spending, and can then reap a whole harvest of data which they can use to market particular services to her. This is, of course, impossible to do when consumers are spending cash. Cash is mute; it tells no tales about its user’s spending history. Digital currency on the other hand; there’s no silencing that singing canary.

So how will J Coin work?

Consumers will have access via a smartphone app. They will be able to pay for goods and services by scanning QR codes.

J Coin will be exchangeable with the yen on a one-to-one basis. The banks are trumpeting the fact that this will be better than using credit or debit cards — no handling fees, for one thing.


But something tells me the banks are missing a key part of the picture.

If Japanese consumers have a high dependency on cash, there is a very good reason for that.

Consider this:

Over the past decades, and despite the global popularity of credit and debit cards, Japanese consumers have yet to be tempted away from cash. Why then do the banks think that this digital currency will do the trick?

I would suggest that there is a deeply ingrained cultural reason for the heavy reliance on cash. Presenting a shiny digital currency is not going to wash that away. A change in culture is necessary, as a first step. This is an amazingly difficult thing to achieve.

So what next?

Let’s see how things go. The consortium is gearing up to publish the J Coin plan within the next short while. The idea is to launch the new currency in time for the 2020 Olympics. It will be interesting to see how things will pan out, and whether, over time, J Coin will achieve its aims.