Photo/IllutrationA shopper pays for groceries with cash at a supermarket in Aomori in December. The shop will not take measures to accommodate cashless shopping. (Asahi Shimbun file photo)

Concerns are growing over the planned program to provide an incentive for cashless payments for purchases by offering a special return in reward points.

Does the government intend to proceed with the plan, which is part of the policy package to temper the economic effects of the scheduled consumption tax hike, without making serious efforts to address the concerns?

Prime Minister Shinzo Abe has promised “careful and meticulous” efforts to prevent the program, to be introduced when the consumption tax rate is raised to 10 percent from 8 percent in October, from causing “confusion” among retailers and ensure that consumers will feel “secure” about their purchases.

As more details about the program have become clear, however, both retailers and consumers have come to feel even more uncertain and uneasy about it.

The program will give shoppers reward points worth 5 percent of their payments if the purchases are made with credit cards or smart cards at small and midsize retail stores and 2 percent for those at outlets operated by retail chains such as convenience stores.

Other options will allow retailers to offer equivalent discounts on such purchases or pay the amounts worth the discounts into the purchasers’ bank accounts.

As a measure to prevent abuse of the program, there will be upper limits to the amount of purchases eligible.

But the ways to reward cashless payments and the upper limits will be determined by the providers of payment services such as credit card issuers.

To receive the benefits they expect from the program, consumers will have to find out which stores are covered, the rates of return the stores offer, 5 percent or 2 percent, whether their cards can be used, whether the rewards are offered as points, discounts or cash payments and what the upper limits are.

It is doubtful whether this complicated system will really contribute to stoking consumer spending after the tax hike, its primary objective.

The Ministry of Economy, Trade and Industry, which is developing the program, plans to create a special map application for smartphones that will display related information about each eligible store while requiring the stores to put up posters showing the logos of the payment services accepted.

The ministry says these measures will make it unnecessary for shoppers to ask the stores questions about the program. But one retail shop owner says he will be unable to answer questions about this complicated program from clueless shoppers. The owner will also have to deal with the tasks related to measures to lower the effective consumption tax rate to be introduced simultaneously, another factor that could cause confusion.

The program to reward cashless payments, which is also aimed at supporting small and midsize businesses, could put a heavy burden on the owners of small retail stores.

It is also questionable whether the program will really produce effects worth the cost in terms of promoting cashless payments.

Of the 279.8 billion yen ($2.51 billion) earmarked under the draft fiscal 2019 budget to finance the program, 178.6 billion yen will be used for the rewards to consumers. The remaining 100 billion yen or so will be spent on related call center services, posters and financial support for card issuers’ promotion campaigns.

Despite this massive spending of taxpayer money, the program will raise the ratio of cashless payments at small and midsize retail stores only to around 17 percent from the current 14 percent, according to an estimate by the economy ministry.

It seems that the Abe administration is bent on pushing through the program anyway without making serious efforts to assess its cost-effectiveness. The Finance Ministry is also responsible for this worrisome situation because of its failure to rigorously evaluate the budget justification for the program.

As the Lower House has already passed the draft budget, the Upper House deliberations on the spending blueprint will be the last opportunity to clarify and sort out problems with the program.

The chamber should urge the administration to rethink this flawed program as it is already starting the process of launching it by inviting payment services providers to apply to be designated even while Diet debate on the budget is still under way.

--The Asahi Shimbun, March 14