Why It’s Time for Japan To Implement Cashless Economy Ahead of Inflation Target Deadlin
The Bank of Japan is exploring the idea of abolishing cash as it strives to hit the 2% inflation rate. Japan might emulate Sweden as it seeks new ways of boosting the economy. The ambitious inflation rate is supposed to be met by 2019, something that has seen Japan implement a number of measures since 2013.
Experts argue that pumping releasing more money is a hindrance to hitting the target. The measures put in place entail widening the BOJ’s holdings in public shares and bills. Additionally, the Treasury seeks to raise BOJ shares from 12% to 48%. The measures were put in place by BOJ chief Haruhiko Kuroda.
BOJ is also ranked among the 10 shareholders in 40% of publicly traded firms in Japan. However, this measure has not yielded the expected results. The aggressive measures were implemented after the Asian giant saw it’s inflation slid further.
In response to the failure in acquiring a stake in top holdings, Kuroda resolved that BOJ will use the policy of negative interest rates. Such policy yielded results in Sweden and Denmark. However, the same case was not witnessed in Japan.
Key industry players now believe that issuing digital currencies might work. According to Andy Mukherjee, the surplus bank notes were motivated by negative rates. In an opinion article, he notes that the rates were later inherited by depositors. It is key to note that in Japan, cashless payment rates stand at only 20% making it a cash-dependent country.
Mukherjee said that the cash dependence is ruining the BOJ’s policies. He points out that it is time the state introduced digital options. He called on Premier Shinji Abe to involve the public sector more rather than relying on the private sector plans.
In the opinion published by Bloomberg, Mukherjee said a digital currency issued by the government will create room for seamless experimentation of monetary policy. He added that the currency can be issued to the state against a perpetual bond sold by the treasury. The money will then be deposited into people’s bank accounts.
Over the last few months, Sweden announced that it was going the cashless way. Studies indicate that the European nation is on course to eliminate cash by the year 2023. A digital economy has been touted to be more efficient for any country. Additionally, the government is able to learn more about citizen's spending behaviours in such a system. Unlike Sweden, Mukherjee highlights that Japan can quickly transform into a cashless nation.