Cash Usage Trends in Japan: Evidence Using Aggregate and Household Survey Data

TCER Working Paper Series: E-131

41 Pages Posted: 3 Apr 2019

See all articles by Hiroshi Fujiki

Hiroshi Fujiki

Chuo University - Faculty of Commerce

Kiyotaka Nakashima

Independent Economist

Date Written: March 5, 2019

Abstract

We examine the trends in cash usage in Japan and its substitution with noncash payment methods, such as credit cards and electronic money, using both aggregate and individual household survey data. We find that cash hoarding accounts for as much as 42% of total cash circulation in Japan. Behind this finding lies an unstable semi-log cash demand function after the late 1990s and a stable log-log cash demand function from 1995 to 2016. We also find that the extent of possible decreases in cash demand because of the substitution of cash for credit cards in day-to-day transactions is not large. Our back-of-the-envelope estimate of the possible maximum decrease in cash demand for day-to-day transactions is at most 0.4% in 2017 of the total cash in circulation in Japan.

Keywords: cash demand, mattress deposits, credit cards

JEL Classification: D14, E41, E52

Suggested Citation

Fujiki, Hiroshi and Nakashima, Kiyotaka, Cash Usage Trends in Japan: Evidence Using Aggregate and Household Survey Data (March 5, 2019). TCER Working Paper Series: E-131 , Available at SSRN: https://ssrn.com/abstract=3351429 or http://dx.doi.org/10.2139/ssrn.3351429

Hiroshi Fujiki (Contact Author)

Chuo University - Faculty of Commerce ( email )

742-1, Higashinakano
Hacihoji
Tokyo, 192-0393
Japan

Kiyotaka Nakashima

Independent Economist ( email )

HOME PAGE: http://kiyotaka.sakura.ne.jp/

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