The Dystopian Dream of Global Central Bank Digital Currencies (CBDCs) Hits Another Snag: The Japanese People’s Love of Cash

Japan is not the only G7 economy where cash is still King, and that could complicate the roll out of CBDCs in so-called “advanced” economies.

On June 20, Asia Times ran an op-ed by Sayuri Shirai, a former policy board member of the Bank of Japan, on the Bank of Japan’s recent decision to shelve its plans to introduce a central bank digital currency (CBDC). Given Japan is the third largest economy on the planet and is often at the leading edge of technological advances, this is a major development. Yet it received virtually no airtime in the international mainstream press.

Cash Still King in Tech-Obsessed Japan

Since 2021 the BoJ has been conducting experiments to test the technical feasibility of the core functions and features of a retail CBDC ecosystem. The second phase of testing began in April 2022. But according to Shirai, the bank has decided to abandon the idea, at least for the foreseeable future. Shirai lists a number of factors behind the decision, foremost among which is the undimmed popularity of physical cash as a means of payment in Japan:

Cash remains king in Japan…

The Japanese public has virtually universal access to the banking system and so the issue of promoting financial inclusion has never been a major policy issue. The use of digital and mobile technologies initiated by the private sector when paying for goods and services is also widespread.

The CBDC idea has not received significant support due to the prevalence of internet banking services, credit card usage and e-money payment tools. The public may not find it attractive to use the CBDC since private sector-based payment tools provide tangible benefits — for example, points that can be gained from using payment services and can be accumulated and used for shopping or payment for other services.

Cash is a safe and highly liquid instrument for the payment of goods and services. As legal tender, cash fulfills the functions of unit of account, means of exchange and store of value. The amount of cash issuance remains high in Japan despite the declining use of cash — accounting for about 20% of nominal gross domestic product.

Cash becomes more useful when natural disasters or military conflicts cause serious damage to communities – for example, via power shortages or the destruction of buildings and computer systems or by weakening trust in the private-sector banking system.

In tech-obsessed Japan, the country that first popularized mobile wallets and smartphones, cash is still king. As I noted in an article for WOLF STREET back in 2016, the value of banknotes in circulation, at ¥90 trillion ($885 billion), or about a fifth of gross domestic product, is the highest in the world as a proportion of the economy.

Demand for cash remains solid, to the increasing consternation of global credit card companies. In a 2013 report, MasterCard estimated that 38% of the total value of the country’s retail transactions were in cash — almost twice the rate in the U.S. and five times the rate in France.

It is not just credit card companies that have been left scratching their heads frustratingly at Japanese people’s soft spot for physical lucre. In October 2016, Tim Cook vented his spleen against cash during a visit to Tokyo, telling the Nikkei that “we don’t think the consumer particularly likes cash.” It was a bizarre conclusion to reach in a country where cash is offered and accepted reverentially even when paying for groceries and where every ¥10,000-note is treated with utmost care. As a rule, they are pristine.

Six years on, the Japanese affection for cash remains undimmed, despite the disruptive effects of the COVID-19 pandemic, including the demonization of cash as a vector of contagion. In a survey by Statista in January 2021, more than 90% of respondents named cash as their preferred payment method, citing reasons such as security and reliability. Fifty-five percent of respondents expressed concerns about the risk of personal data leakage when using electronic payment methods. Nearly 42% worried about credit cards and account details being stolen while around 38% said cashless options made them less aware of the amount of money they are spending, increasing the risk of spending too much.

Shirai proffers another reason why cash has not lost its luster — namely the Bank of Japan’s application of a zero interest rate policy (ZIRP) over the past decade and a half:

[Even as bricks-and-mortar retailers have upgraded their cashless payment systems], cash in circulation has been rising. This is partly because of the long-standing low retail deposit interest rate — which was below 0.2% from 2007 through 2010 and below 0.02% from 2011 through 2016, and has been at 0.001 per cent since 2017 for ordinary retail bank accounts.

That has transformed cash into a substitute for bank deposits, contributing to Japan’s rising cash hoarding trend. Cash hoarding refers to cash lying idle without being utilized for economic and investment activities.

In a paper released in May the Bank of International Settlements reported that 90% of 81 central banks surveyed from October to December 2021 were “engaged in some form of CBDC work,” with 26% running pilots on CBDCs and more than 60% doing experiments or proofs-of-concept related to a digital currency. The BIS attributed the growing interest around CBDCs to the recent shift to digital solutions during the COVID-19 pandemic as well as recent growth in stablecoins and other cryptocurrencies.

So-called retail CBDCs offer a range of potential benefits including reduced transaction costs, more efficient cross-border transactions, real-time payments and reduced illegal transactions. But the biggest benefits would almost certainly end up accruing to the central banks themselves, which would gain far greater centralized control over the economy. That is where the potential drawbacks for the rest of us begin.

Put simply, the central bank will be able to control money all the way to people’s digital wallets and applications. Constant financial surveillance will become a more or less inescapable reality, at least for the overwhelming majority of citizens. So too will programmable money, allowing central banks to determine what we can (and can’t) spend our money on and whom we can (and can’t) transact with. They will also be able to impose targeted financial transactions on citizens as well as enforce negative rates as a means of incentivizing people to spend rather than save money.      

A Mixed Record So Far

The world’s first CBDC was launched by the Central Bank of Ecuador way back in 2014 but it was a massive flop. The so-called “dinero electronico”, or DE, hit a wave of public distrust. By 2016 the DE only accounted for 0.003% of money in circulation. Two years later it was put out of its misery by Ecuador’s national assembly. In 2019, the Bahamas launched the Sand Dollar, clearing the way for rapid adoption among the archipelago’s 30 inhabited islands. In June this year, the Bank of Jamaica recognized the island’s CBDC, Jam-Dex, as legal tender.

The Eastern Caribbean Currency Union, which includes Anguilla, Antigua and Barbuda, Grenada, is piloting DCash. Half a world away, the People’s Bank of China has launched pilot schemes for its digital yuan across roughly two dozen cities and is gradually expanding the applications of its CBDC. The Reserve Bank of India has scheduled a 2023 launch date for its digital rupee. Russia plans to do the same with its digital rouble. The central banks of Brazil, Mexico and Indonesia are also talking about launching CBDCs in the coming years.

But there is a world of difference between talking about launching a CBDC and actually pulling it off. As I reported last week, Nigeria’s e-Naira, the first CBDC to be launched by a largish economy, is already floundering. Ten months after the launch, take-up is exceptionally low. In March this year the Nigerian daily newspaper Punch reported that many major retailers have largely shunned the digital currency. Cashiers don’t know how to process it and most consumers don’t even know it exists. Three months later, the Central Bank of Nigeria’s governor accused private-sector lenders of sabotaging the project.

Now, the central bank of the world’s third largest economy has decided to put its CBDC project on ice, largely due to the Japanese people’s unwavering commitment to cash. Japan may not be the only G7 economy to take such a stance.

In Germany, for example, cash also remains the most popular means of payment. According to the Bundesbank’s study on payment behavior in Germany for 2021, respondents used banknotes and coins to make a total of 58% of their payments for purchases of goods and services. Admittedly, that is down from 74% in the Bundesbank’s last major study from 2017, but the central bank attributed most of this change to the greater use of online payments during the lockdowns.

“Neither digitalisation nor the pandemic have been able to oust cash. When it comes to making payments, cash is still by far the most popular means in Germany,” explained Johannes Beermann, the Bundesbank’s Executive Board member responsible for overseeing cash management.

Back in 2016, proposals by the Merkel government to ban cash payments above €5,000 triggered a fierce public backlash. The country’s bestselling newspaper, The Bild, published a searing open letter titled “Hands Off Our Cash,” while a broad spectrum of political parties condemned the proposed measures as an attack on data protection and privacy. Six years later, it is interesting to see that both the third and fourth largest economies on the planet, Japan and Germany, are still largely cash-based.

If the findings of a Bundesbank survey of German households published last October are any indication, most Germans are not too keen on the idea of a CBDC. Only around 13% of respondents supported the introduction of a digital euro while more than half (56%) were against. Roughly one-third were undecided. That was before a software glitch affecting payment card terminals caused a weeks-long payment outage. As I noted at the time, the outage underscored one of the dangers of a totally cashless economy: system fragility.

Back in 2016, the then-head of the Bundesbank, Jens Weidmann, said (emphasis added): “It would be fatal if citizens got the impression that cash is being gradually taken away from them.” In a speech this April Uchida Shinichi, the executive head of the Bank of Japan, went even further by suggesting that the BoJ did not have the right to issue a CBDC without first securing the consent of the Japanese people:

The decision as to whether or not a CBDC should be issued cannot be made by the Bank nor by the financial sector alone. It will have to be a judgement by the Japanese people.

It would be nice if other central bankers took heed, though I’m not holding my breath. As I wrote in a previous piece, given how much is at stake, CBDCs are among the most important questions today’s societies could possibly grapple with — not only from a financial or business perspective but also from an ethical and legal standpoint. They should be under discussion in every parliament of every land, and every dinner table in every country in the world.


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  1. griffen

    In God We Trust, All Others Pay Cash. Using the US greenbacks and coins, I find it frequently enough for myself it enforces reasonable discipline on spending and consumption. The young ‘uns of today have a counting constraint as it is, or occasionally that is my experience.

    I seriously would question if the US decided to move ahead with such plans. That might go as well as the ACA healthcare exchanges went. Sarc intended.

  2. rob

    How is it even a question as to let the “powers that be”, control EVERYTHING we use money for?

    In this age where the vast majority of people , on any given subject; for various and opposing reasons; all seriously DISTRUST/HATE their government leaders, government programs, corporate leaders, and most institutions of any size….
    WHY would we want the TSA agent at the airport, version of a “money cop”… deciding what we can do. THAT is worse than current freedeoms kept by prisoners today in jails. at least they have something they can use to buy contraband.
    After all, a persons contraband right now could be…
    Getting a daughter abortion services/counseling… or even birth control in some people’s minds.
    or buying medicine from canada, because you just can’t afford the US price..
    Or deciding the bag of weed or mushrooms your buying is medicine, and you want some..
    and a thousand other things… maybe even donating to website blogs who peddle disinformation(as cited by the tsa censor..) who want to tell the people the truth.

    some decisions have “cons” so bad…. it outweighs the “pros”… no matter what.
    What hasn’t been hacked into?
    What isn’t controlled by people that are undeserving of “the benefit of the doubt”
    cash is a “check and balance” against tyranny. absolute tyranny.

    1. flora

      Imagine what a govt that changes the meaning of the word “recession” to then declare there is no recession would do with absolute control over everyone’s cash. That’s nightmare stuff right there.

      1. rob

        It is the stuff of nightmares. The fodder for conspiracy theories for the last 75 years. It would be the keystone of the arch of oppression… for everyone.
        I just don’t get why people don’t get that CBDC is the solution in search of a problem. It is being pushed from “on high” ,as if people actually wanted this. Trying to create a sense that “WE” are asking for it.

        1. ThePodBayDoorsAreClosed

          The blimp who heads the BIS tells us straight up what they are doing and why, the end of human freedom as we have known it:

          Here in Australia the grass roots defeated a cash ban a number of year ago, so the totalitarians regrouped. The massive bill now put forth by the new minority far left/Green government is “Protecting Children From Online Hate”. AKA universal digital ID, starts off as “voluntary”. If you question any part of it course you are FOR child predators, and probably racist too.

          During the world’s worst lockdowns here you had to check in with a QR code in order to enter any shop (this was “contact tracing”, and the Premier of the state recently admitted they did nothing with the data because there was way too much of it). I never once checked in and always just faked it at the door. On one occasion at the grocery store I got to the checkout and used my bank card. A screen popped up: “We see you have not checked in with QR, please see store personnel for assistance”. The transaction went through anyway, but it was clear the state and the banks were already linked up. Express any dissent, drive a petrol vehicle, refuse to eat insects, refuse the next mRNA experiment, instant and total impoverishment for you. Forward Soviet!

  3. Carla

    @Nick Corbishly: “Shirai proffers another reason why cash has not maintained its luster in Nippon — namely the Bank of Japan’s uninterrupted application of a zero interest rate policy (ZIRP) over the past decade and a half:”

    Perhaps you meant to say “why cash has not lost its luster in Nippon” ?

    1. Nick Corbishley Post author

      D’oh! You’re right, Carla. That’s the danger of changing sentences at the very last minute. Thanks!

  4. The Rev Kev

    This article explains something that I have read about. In Japan, houses are not appreciated and are built not to last. After thirty years, the houses are typically torn down as they have no value anymore-

    But I have read a few stories where in doing so, especially in the case where the former inhabitants are now deceased, it happens that cash hoards are found hidden in walls or under the floorboards. I can see their viewpoint. If I go buy a bar of chocolate (a guilty pleasure) and pay cash, that is it. But in an era of digital cash, perhaps that purchase is reported to a health insurance company where it might eventually affect your insurance premium. Or maybe the next time I donate to NC, that it will be decided that I will not be allowed to do so. Or if I have savings, perhaps it will suddenly have a negative interest rate of 10% which means that if I do not spend that money, it will all be gone in only ten years. So I think that the Japanese have a point.

    Side note – Yes, Japan is often at the ‘cutting edge of technological advances’ but they still make and use floppy discs. They are still very conservative there.

    1. SocalJimObjects

      They still use fax machines as well. Not kidding. Can someone name a major software powerhouse from Japan? A lot of Japanese still think that software supremacy is simply a fad.

      Anyway, the day the Japanese stops using cash will be a horrifying one because that probably means the economy has collapsed and people are robbing each other on the street. For people who have never been to Japan, one other reason why cash usage is still so prevalent in Japan is because how safe the country is. There are just too many stories of people leaving their wallets behind somewhere and later on getting their wallets back with the contents intact.

    2. Arakawa

      It’s worth noting that the Canadian government attempted a tentative test run of the “police society by digital control over flows of money” theory with its announcement to freeze bank accounts during the convoy protests. The odd and disconcerting rumours around this led a number of people to open a small savings account at the Bank of Mattress, and furthermore led the government to rapidly reverse its position and announcing that really, they had almost not frozen any accounts at all.

      (Essentially they checkmated themselves with their communication: playing up the threat of extrajudicial bank account sanctions undermined trust in the banking system; downplaying the sanctions robbed them of their apparent function of using calculated ambiguity to strike fear into the hearts of GiveSendGo punters who chipped in $50-100.)

      When asked about what the banks thought of the measure at a subsequent public inquiry, Chrystia Freeland had roughly the following to say:

      “Let’s see …. on these dates we had discussions with the banks pause leafs through notes we met with the banks and leafs leafs leafs meeting with the banks we had discussions … leafs leafs leafs pause pause pause and we discussed with the banks that turns to leaf through notes, to the growing impatience of the questioning MP it is very important that I consult the notes to avoid making an inaccurate statement further leafs through notes oops haha it looks like the time is up next question pls.”

      While that was happening, I happened on a nice store run by some Mennonites in the countryside near Kitchener. Sacks of flour and rows of eggs in nice modern fridges, local produce, all cheaper than the big city. Lady at the register always has a smile and a kind joke to tell you. Cash only.

      It’ll be interesting to see how the CBDC crusade advances in Canada.

        1. Arakawa

          Indeed, that same Freeland who is currently the deputy PM and unofficial Minister of Everything.

    3. digi_owl

      The attitude about housing may well come down to the island being a earthquake magnet. Never mind that much of it was bombed flat during WW2, so very little of the housing is older than the people living in them.

      And frankly i miss floppies. There is something about hearing that mechanism snap into place and media spin to life that makes it all more “real” in a sense.

      There are times i ponder building a desktop PC with a hot swap dock for a 2.5″ HDD/SSD or some descendant of the Compact Flash card format, to see if that replicates some of the experience.

  5. Eureka Springs

    My dollar bill still says – This note is legal tender for all debts, public and private. I refuse to use plastic unless I buy airline tickets, or reserve hotel or autos, occasional online purchases and two monthly bills.

    I went to the county dump (which may be some private entity using a very official public sounding name) last month and was told they no longer accept cash. I could pay with a plastic card or go across town and back to buy a minimum 25.00 paper card which they would punch holes out in one dollar increments until gone. My usual dump expenditure per month varies from 3 to 8 bucks, so they get to take peoples money hostage and they make people waste 30 minutes and gasoline to be held hostage. So for now I jump through these hoops and I am quite loud about how wrong it is as long as tie me up they are going to hear all across the office or yard how illegal and rude this is.

    1. ambrit

      Our half horse town has mandated trash bins with City pickup, all paid for as part of the monthly water bill. It’s a roundabout way of dumping the costs on the house or apartment dwellers. Refuse to pay the garbage fees and you get your water cut off. Get your water cut off and the City comes around and evicts you under the public health rules, whether you own or rent.
      The unintended consequence to this is a steady increase in “illegal” dumps, even within the City limits. These impromptu dumps are mainly comprised of larger items; building waste, big yard debris, furniture and broken appliances, etc.
      If you are near to the real countryside, watch for mini-dumps springing up at the ends of obscure country roads, etc.

  6. Rip Van Winkle

    They must be able to calculate change back in their heads better than ROW.

    Thank a teacher – and parents- in Japan.

    1. Mel

      The trick is to count up from the purchase price to the amount tendered.

      Like six-ninety-five, seven, eight, nine, ten, thirty, fifty, while handing over a nickle, three ones, and two twenties. (Sure do hope I got that right.)

  7. Terry Flynn

    If the powers that be restrict cash usage on too many things you’ll see local communities revert to credit based systems based on trust and knowledge which predated coinage….. This may be a step forward as we escape overly restrictive national policies based on flawed models of money…. I know the Bristol pound is not ideal example but I’m betting others have ideas on how to perfect it….

    Bring on the Mercian Crown……

    1. PlutoniumKun

      I would really love this to be the case, but in my experience its only oldsters who are resistant to electronic money. I’ve been somewhat shocked and surprised at how pretty much everyone I know under 40 has enthusiastically taken to paying for everything by card or phone tap, and settling private loans by Revolut. One younger relative of mine actually expressed surprise when I produced some notes to pay for some coffee recently (ironically, because the shops card device was broken and they asked for cash and she didn’t have any). Maybe significantly, the only hold outs I know are some immigrants, who know the inherent value of paper dollars and euros.

      1. ambrit

        Our experiences out “on the street” mirror yours. Excessive reliance on electronics looks to be a classic example of counter survival adaptation.

      2. Carla

        PK, I have noticed that younger Americans have no concept whatsoever of privacy, or why it might be important. If I mention it in a discussion of electronic payments, or CBDC, or harvesting and sale of personal information posted online, they just give me a blank look. But many, many immigrants are quite cognizant of the constant surveillance of every individual that Central Bank Digital Currency would entail. They tend to be more savvy about the ways of the world than many Americans.

        To me, privacy and personal sovereignty are important, so for example, I don’t do Facebook or use Microsoft, and I choose to use cash for certain types of purchases.

        Anyway, I think Nick Corbishly addressed the threats CBDC’s pose to privacy and freedom in this post — and I certainly thank him for that.

    2. digi_owl

      Back around 2008 or so there was a flurry of talk about community cash in response to the financial crash. This as a way to keep the economic activity local, rather see it siphoned off to larger urban hubs.

  8. orlbucfan

    Hubster is a high-tech wizard (now retired). I was born into a high tech family (NASA from its inception). I trust my paper checks/bills and metal coinage. Big reason why? Hurricanes and lengthy power/electrical outages which are becoming more and more the norm here with climate chaos. Plus, as others point out, CBDC is a real “nice,” convenient way to control society. Protections against that abuse must be implemented. The sooner, the better!

  9. Acacia

    Things may be slowly changing in Japan.

    It is true that cash is still treated with great reverence and you can buy a 100 yen piece of candy with a 10,000 yen bill, no questions asked. But cashless payment systems (e.g., PayPay) are popping up everywhere in the retail sector, especially in convinis. ATMs that used to accept coins now discourage this. Payment cards like Suica are used for trains and subways (these are not new but now deeply entrenched). Electronic auto-payment of insurance, utilities, taxes, rent, grocery delivery, etc. is very common. And there are now small businesses that don’t handle cash at all.

    That said… booo to CBDCs.

  10. Jan Krikke

    So we expect that in the year 2050 we still have armored cars driving around town filling ATM machines? I wouldn’t count on it.

    1. lyman alpha blob

      Moar and newer technology is always better, especially the moar part. Just look how great the world is today with all of our bleeding edge tech. How could even moar not be good?

  11. digi_owl

    From what i have picked up over the years, Japan is “tech obsessed” in a very peculiar way.

    The tech they obsess over is the physical kind, the fax machines, the phones, the games consoles. They have far less interest in the software side, something that the west is far more obsessive over (most of the big western tech companies these days are primarily software oriented).

    Also, the reason they were early with digital payment methods was vertical integration.

    Japan is a nation of business groups. With each group being centered around a bank that provide group members credit as needed for keeping the business going.

    So introducing phone payment was “easy”, as the carrier integrated their bank’s payment system into the phone. And i think it was more or less a credit card arrangement, tied to the contract signed with the carrier

  12. IntoTheAbyss

    Wouldn’t this make the administrative headquarters a huge target? Send a missile into the server database (or Stuxnet)? If all of the sudden, nobody knew what anybody was worth, especially themselves, it would be mayhem.

  13. schlott

    We the people need to coordinate a push back collectively against our nations CBDC implementation. If they want to force the “free market” into it so bad, they obviously intend to exploit us more thoroughly with it.
    I propose we need to start the transition to using silver coin for the “minor and petty transactions of daily living”. In the USA, I propose pre 64 “junk” silver dimes and quarters be used and accepted by merchants -with a simple cell phone look up for current market value. Local coin shop exchanges could convert between CBDC and silver so merchants and consumers can tank up as they desired. This would hopefully start getting the infrastructure and mindset in place to revert to real money for when our central bank currencies collapse like so many dominos in a row – from loss of faith by the people. Any one who has lived a while knows it is coming. Do we wait until they charge $1k for a loaf of bread or gallon of milk? Good fortune favors the prepared.

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