Cashless Lowers Hurdle to Higher Prices

The rise of cashless payments in Japan is helping breach an invisible barrier to raising cigarette prices, according to an article in Nikkei Asia.

Japan’s tobacco companies have long held on to an unwritten rule to never raise the cost of a pack of cigarettes above ¥500 ($4.79), the domination of the country’s most valuable coin.

That barrier allowed for easy transactions. A consumer could walk into a shop, slap loose change on the counter and walk away with a pack.

The penetration of cashless transactions, however, has eased price sensitivity, according to Naohiro Minami, chief financial officer at Japan Tobacco.

After the company raised the cost of some cigarette products by ¥50 on Oct. 1, it experienced less “rush demand” than anticipated.

Driven in part by the coronavirus pandemic, cashless payments reached a 27 percent of all transactions last year, according to data from the Ministry of Economy, Trade and Industry (METI). Compared with other nations, however, Japan’s rate of cashless transactions remains low. Great Britain and China boast more than 60 percent penetration, according to METI, and the proportion in South Korea is above 90 percent.