Japan government pushes for digital wage payment amid safety concerns

The labour ministry is advocating for companies to adopt digital payrolls within the current fiscal year, though safety concerns remain.
By: | April 22, 2021

The reforms are aimed at promoting a cashless society, especially during the pandemic, to help people avoid touching cash so as to minimise the transmission of the virus.

The measures would also help foreign blue-collar workers, who often have issues with creating bank accounts, to get their wages without having to do so. 

To enable digital payments through smartphone-based settlement apps, the ministry said a revision of the ordinance would be necessary. It also said that it is vital that digital payments through apps have safety features.  

The Health, Labour and Welfare Ministry will evaluate digital salary payment service providers who can transmit the funds and will base its decision on whether they can compensate for losses that could be incurred by business failure or illicit withdrawals. 

The government had aimed to work out the details of the scheme within fiscal 2020 that ended last month, but the scheme was delayed due to challenges involving ways to ensure safety in digital salary payments. 

For the public, concerns over the safety of digital payroll stem from lax rules for money transfer firms compared to those for financial institutions. While the government’s payoff programme can protect a maximum of 10 million yen (US$92,393) per depositor in the event of a bank failure, the regulation does not apply for money transmitters. 

READ: Labour union in Japan calls for raise in minimum wage of essential workers

In addition, there have been safety concerns over fraudulent withdrawals since cases targeting bank accounts linked to e-money services provided by major mobile carrier NTT Docomo Inc. were confirmed last year. 

The banking industry has opposed the proposal mainly because having accounts for salary payments help them promote their businesses to customers, according Kyodo.