The number of small and midsize businesses registered for a program that was introduced by the Japanese government in attempt to reduce the negative economic implications induced by a hike in consumption tax last October, which surpassed one million in mid-February.

The nine-month program through June has been widely accepted in society, with the number of registered businesses doubling from around 500,000 at the time of the tax increase in four and a half months, an official at the Ministry of Economy, Trade and Industry said.

Along with a hike in the tax from 8 percent to 10 percent, the government introduced the program to refund up to 5 percent of payments for goods and services purchased from small and midsize businesses, such as retailers and restaurants, if the purchases are made by cashless payments such as credit cards and quick response, or QR, codes on smartphones.

The refund is made in the form of "points" that are accumulated and used later for other purchases. The program is aimed at preventing a drop in consumer spending following the tax hike and stimulating consumption to raise the share of cashless payments in Japan, which is lower than in China and South Korea (among Asian countries).

The government has set aside a total of 700 billion yen to promote the program in its budgets for fiscal years 2019 and 2020.

There were 1.04 million registered businesses across Japan as of March 1.

With the program applicable to an estimated two million businesses, the ministry official said it has "made a certain advance" in terms of promoting cashless payments.

But the negative impact of the tax increase cannot be fully covered by the refund system and other measures taken by the government to stimulate consumption.

The Japanese economy, as measured by gross domestic product, shrank an annualized 7.1 pct in price-adjusted real terms in the October-December period from the previous quarter due to a sharp fall in personal consumption, among other factors, according to revised government data.

Since the start of this year, furthermore, the spread of new coronavirus infections has seriously affected the domestic economy through significant restraints on social activities.

In its monthly economic report for March, the government dropped its assessment that the nation's economy is "recovering at a moderate pace" and said it was in a "severe situation," sharply depressed by the novel coronavirus epidemic.

Government officials and economists, therefore, are starting to call for the government to continue the tax refund point program beyond its scheduled expiration at the end of June.

From the beginning, the program was questioned by skeptics, who noted that benefits to elderly consumers would be limited because of their unfamiliarity with smartphone and other digital payment systems.

As the digital divide can directly affect people's daily lives, some government officials stress the need to take the digitally disadvantaged into consideration.

In January, New York City Council members voted to require retailers and restaurants to accept cash for payments in order to prevent discrimination against people without access to credit cards and other cashless payment tools.

With New York's stance clearly different from Japan's policy of encouraging cashless payments, a senior ministry official emphasized the importance of promoting cashless payments, saying that cash is still widely used for payments in Japan. But the official noted at the same time that a payment system friendly to anyone is needed as well as the refund program and other measures, saying, "There cannot be services and policies that leave the elderly behind."

The ministry is looking at analyzing elderly consumers' payment methods to introduce measures to protect them from scams and protect them in daily life, officials said.

JIJI Press