Japan's Credit Card Deficit from Foreign Tourists Explained

Japanese card companies face a 30 billion yen deficit due to high fees from foreign credit card usage.

### The Impact of Foreign Tourist Credit Card Usage on Japan's Financial Landscape
* 💳 This year, Japan faces an estimated deficit of **over 30 billion yen** due to foreign tourists using credit cards, which presents challenges for Japanese card companies.
* 📉 When a foreign tourist makes a purchase of 10,000 yen, the processing fee typically ranges from **1% to 3%**, but after accounting for various operational and interchange fees, Japanese card companies incur losses of approximately **70 to 80 yen per transaction**.
* 🌍 The disparity in fees between domestic and international card usage contributes significantly to these losses, as **international fees are substantially higher**, particularly for brands like **Visa and MasterCard**.
* 📊 With more than **30 million foreign visitors** expected this year, spending in Japan is projected to reach a **record high of 8 trillion yen**, with a significant portion likely to be **charged to credit cards**.
* 💰 The anticipated deficit is based on the assumption that **around 60% of this spending will be conducted via credit cards**, leading to **widespread financial implications for card companies**.
* 🏬 To mitigate losses, six out of seven major card companies are considering a **two-tiered pricing model** that would shift some financial burden onto stores, complicating the dynamics between merchants and card issuers.
* 🤝 While this new pricing structure could theoretically reflect true costs, it risks **increasing prices for consumers** and leading to **tough negotiations between card companies and merchants**.
* 🧐 The ongoing reliance on international payment brands highlights a broader issue, where the financial benefits of cashless transactions are increasingly **funneled to American companies**, raising questions about the **sustainability of Japan's payment infrastructure**.

This year, the estimated deficit caused by foreign tourists using credit cards in Japan exceeds 30 billion yen. Why does it lead to a deficit for Japanese card companies when tourists use their cards in Japan? What impact does this have on consumers? We will explore these questions. Our guest today is Ms. Miya Yamaoka, the former director of the Payment Systems Department of the Bank of Japan and an expert in cashless payments, who is also the director of the Financial Research Institute. Thank you for joining us.

Thank you for having me. Now, let's first confirm why Japanese card companies incur losses when foreign tourists use credit cards in Japan. For instance, if a foreign tourist makes a payment of 10,000 yen at a shop or restaurant in Japan using a credit card issued in their home country, the credit card processing fee typically ranges from 1% to 3%, depending on the transaction volume. For this example, let's consider a large store with a fee of 1.99%. In this case, out of the 10,000 yen, 190 yen would be the revenue for the card company. However, the issue arises beyond this point. The card company...

Looking at Mr. Yamaoka, it seems that there are various fees that need to be paid. First, the domestic system operation cost is about 10 yen. Then, for overseas card issuing companies, there is an interchange fee, which is around 180 yen. Additionally, for international brands like Visa and MasterCard, the fee is 880 yen. This can be considered as a usage fee for the international payment infrastructure. When we sum all these amounts and compare it to the previous figure of 190 yen, we find that it results in a deficit of about 70 to 80 yen. This means that the more foreign visitors use their cards, the more the Japanese card companies accumulate losses. So, how did this situation come about? 

This is because the fees paid when using cards differ significantly between domestic users in Japan and foreign visitors. As a result, when foreigners use their cards, the fees involve international brands and interchange fees.

This will be quite expensive. However, Japanese credit card companies consider both parties in order to develop merchant networks. When used in Japan, they likely won't charge such high fees, resulting in a lower overall fee structure for merchants. Recently, however, the frequency of use by foreigners has increased more than expected, leading to an overall rise in deficits. 

In the first place, when Japanese people use credit cards in Japan, as you mentioned, the fees are not that high, correct? Yes, in Japan, many credit card companies handle both card issuance and merchant contracts. This is called a merchant acquiring transaction, and in this case, interchange fees do not occur. Even when these two functions are separated, the default rates of Japanese credit cards are significantly different from those overseas. Therefore, in comparison to Japan's interchange fees, the fees charged overseas are...

高めになります。うん、それから海外の方が使われる場合には、やはりビザカードですとかマスターカードに対してブランド使用量、これは国際的な決済インフラを使うことによって生じてくるものです。これを払わなければいけない。しかし、国内の方が国内で完結する取引をした場合には、海外経由の決済というのが発生しないので、そのインフラの手数料がかからないということになります。これらを足し合わせると、国内と海外の場合でかなりの手数料差が生じるということになります。うん、ここを安くすることというのはできないんでしょうか。

こちらはですね、ビザとかマスターカード、このインターチェンジフィーの体系というのは、これは標準の手数料率を公開しています。で、ほぼこの2つのブランドというのは非常に大きいということで、事実上これと違う手数料率を使うことは難しいというのが実態だと思います。うん、ここで外国人観光客の動向を確認していきましょう。今年は日本を訪れる外国人は3000万人を超えると見られ、これまで一番多かったコロナ前の

It is estimated that 31,318,188 people will be updated. As for the graph on the right, it is expected that the amount of money spent in Japan this year will reach a record high of 8 trillion yen. Mr. Yamaoka, what proportion of this 8 trillion yen spent by foreigners will be made using credit cards? 

Yes, I believe the majority will be through credit cards. According to statistics, as of 2020, the total usage of credit cards was about 75 trillion yen, with approximately 5% of that being international usage. Now, as this figure approaches 100 trillion yen, the rate of international usage is also expected to increase. This means that, through simple calculations, we could see about 5 trillion yen. Therefore, if we consider 5 trillion yen out of the 8 trillion yen, it is likely that a significant portion will indeed be made using credit cards. 

The 30 billion yen deficit projected for this year for Japanese card companies is based on the assumption that 60% of the 8 trillion yen spent by foreigners in Japan will be paid using credit cards. The Nikkei conducted a survey among major card companies that will bear this deficit.

Recently, we received responses from seven major companies. All seven companies reported that their losses have been widening. Furthermore, six of these companies are considering or have already implemented a system where the burden of losses will be shared with stores rather than being absorbed solely by the customers. They are examining or have introduced a two-tiered pricing model. Regarding the cause of these losses, all seven companies indicated that the high payment amounts to international brands such as Visa and MasterCard are a significant factor. Mr. Yamaoka, what are your thoughts on imposing this burden on the stores through a two-tiered pricing model? 

Yes, theoretically, a pricing structure that reflects costs in detail would be ideal. However, from the perspective of the stores, they cannot simply accept this. Japanese card companies have historically offered lower rates tailored to the Japanese market, understanding the differences in pricing structures. For the stores, this detailed pricing would effectively mean a price increase. I believe this will lead to tough negotiations with the card companies.

It seems that there is a high level of dependency on consumption among foreigners, particularly regarding luxury goods and branded items. I believe this will lead to a focus on requests related to these areas. As for the reasons behind the deficit, it has been indicated in surveys that international brands such as Visa and MasterCard are contributing factors. How do you perceive this?

Yes, this is indeed a common issue shared with digital Asia. Currently, there is a discussion that if we use AI, we must purchase American semiconductors, and when we search, money goes to American tech giants. The fact is that the United States has been nurturing international payment companies since the 1950s. As cashless transactions increase, it becomes easier for money to flow to these large American companies. This structure is becoming more evident. Therefore, the establishment of such platforms from the beginning is significant. Additionally, the payment sector relies heavily on networks.

Externalities tend to occur more easily when there are many users; the more individuals there are, the more public utility tends to increase. This leads to a tendency for market polarization to progress. I believe that such issues are occurring simultaneously. Does this situation not affect us as consumers? And is there no solution to resolve this deficit? Let's explore this further.

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The Deficit Impact of Foreign Tourists Using Credit Cards in Japan

The estimated deficit for Japanese card companies due to foreign tourists using credit cards in Japan exceeds 30 billion yen this year.

The processing fees from these transactions, combined with additional costs from domestic operations and international card issuing companies, result in a loss of 70 to 80 yen per transaction for the Japanese card companies.

The significant difference in fees between domestic users and foreign visitors contributes to the accumulation of losses for the card companies.

The Impact of Foreign Credit Card Use in Japan

Japanese credit card companies have a unique structure, handling both card issuance and merchant contracts, which keeps fees low for local transactions.

The recent increase in foreign credit card use has led to a rise in deficits for these companies.

The difference in fee structures between domestic and international transactions is significant, with overseas fees being higher due to brand usage and international payment infrastructure.

The Impact of Foreign Spending on Japan's Economy

Japan is expected to see a record high of 8 trillion yen in foreign spending this year, with a significant portion likely to be made using credit cards.

The international usage of credit cards is increasing, potentially contributing 5 trillion yen to the total.

Japanese card companies are facing a 30 billion yen deficit due to the high payment amounts to international brands, leading to a two-tiered pricing model to share the burden of losses with stores.

There is a high dependency on consumption among foreigners, especially for luxury goods and branded items.

International brands like Visa and MasterCard are contributing to the deficit, with cashless transactions increasing the flow of money to American tech giants.

The establishment of payment platforms and the reliance on networks are crucial in shaping this financial structure.

Externalities are more common with a larger number of users, leading to increased public utility and market polarization.

This simultaneous occurrence raises concerns for consumers.

The situation creates a deficit, prompting the need for potential solutions to address the issue.

クレカポイントの見直しも!? なぜ？訪日客増でカード会社赤字のワケ【NIKKEI NEWS NEXT】

クレカポイントの見直しも!? なぜ？訪日客増でカード会社赤字のワケ【NIKKEI NEWS NEXT】

クレカポイントの見直しも!? なぜ？ 訪日客増でカード会社 赤字のワケ【NIKKEI NEWS NEXT】

クレカポイントの見直しも!? なぜ？ 訪日客増でカード会社 赤字のワケ【NIKKEI NEWS NEXT】

クレカポイントの見直しも!? なぜ？訪日客増でカード会社赤字のワケ【NIKKEI NEWS NEXT】

クレカポイントの見直しも!? なぜ？訪日客増でカード会社赤字のワケ【NIKKEI NEWS NEXT】