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Japan: Cash demand grows during the pandemic

Categories : Cash is a public good, Cash is the most widely used payment instrument
February 25, 2021
Published in : Asia, Cash demand, Coronavirus, Japan
Cash in circulation grew by 5% in value in 2020. The growth is due exclusively to the increased demand for the 10,000 yen note, signaling as in many other countries the role of cash as a safe haven in times of crisis.
Communication Team

Japan is one of the countries with the highest levels of cash in circulation in relation to GDP in the world, with a ratio exceeding 20%, compared to 8% in the United States or 11% in the euro area. In value terms, banknotes in circulation have doubled between 2000 and 2019; however, the highest denomination, the 10,000 Yen note, represents 90% of cash in circulation indicating that cash is an important store of value. According to Reuters, Japanese households held over half of their assets in cash and deposits in 2019.

In spite of government efforts to incentivise digital payments, the impact of the pandemic on consumption as well as an accelerated adoption of digital payments during the pandemic, growth of cash in circulation has resumed in 2020 after a period of stabilisation in 2019. Cash in circulation grew by 5% in 2000 compared to 2.2 % in 2020.  The growth is entirely due to the 10,000 yen note, whereas the other denominations have remained stable or declined slightly. The total value of notes in circulation reached 118 trillion yen in December 2020, a 30% increase since 2015.

According to Asahi, demand for cash have been driven by a combination of low interest rates which make it less interesting for consumers to deposit money in a bank account and higher fees to use ATMs. In 2020, the central government also approved virus-related cash handouts of 100,000 yen to every person. The lower demand for small denomination is due to a shift in consumer spending with online shopping and home-delivery services on the rise.