Japan is where the future happens first, whether we’re talking about robots, smart phones or housing bubbles. Japanese economy started showing a positive growth trend after a period known as ‘Japanese Economic Miracle’ that was post-WWII to the end of the . Japan’s economy recorded positive growth when other countries were suffering from the slowdown. During the economic miracle period, suppliers, manufacturers, distributors, and banks decided to work together forming groups called Keiretsu.
Soon Japan rose to one of the most developed countries in East Asia. The Japanese education system also played a part in the economic growth by producing highly skilled and disciplined workers. Japan was one of the countries with high levels of literacy, and it still is to date. Another interesting fact about Japan, which maker her stand out among the developed nations and in Asian sub continent is their economy that is more based on cash transactions compared to cashless or digital economy.
In comparison to her neighboring countries like South Korea and China where most of the sales are cashless, 80% of the retail sales in Japanese based on cash. According to a report by Bank for International Settlements in 2016, the physical currency in circulation was about 20% of Japan’s economy, which is highest compared to other developed countries like Sweden which has lowest ratio at 1.14%.
As per Nikkei Asian Review, Japan loses over 2 trillion yen ($17.6 billion) every year for their die-hard affection for cash. The demand in cash is not decreasing and is still king in Japan so Banks ensure to make it available even if it costs them. The attachment with cash is rooted deep in Japanese culture, where gifting small amounts of cash on various occasions is still a tradition. In addition to this Japanese customers are sympathetic to small business owners resisting cashless transactions, as they have to pay 3% on card transactions.Even taxi drivers in Japan insist on cash payment. The high cash levels in country have shifted from being conservative to becoming a result of improving fundamentals. Even in the last three financial years, Japanese companies’ buybacks have reached record high levels and they are mostly financed through their own balance sheet rather than debt.”
Majority of economic stability in country started after Prime Minister Shinzo Abe was elected. He took a number of steps took to revive the country’s economic fortunes like encouraging to print lot of money to give the economy a chance to grow as much as possible. To counter shrinking working-age population of 70 year old who are retired he encouraged women from age 25-to-54-year-old for working. At present the share of women has increased to 70- 77.6 percent. In addition to this all 25-to-54-year-olds have a job up to an all-time high of 85.2 percent. With unemployment rate 2.5 percent, it’s safe to say that almost everyone who wants a job in Japan has one.
Contrary to this India had emerged as the sixth largest in 2017 but is pushed to the seventh place in the global GDP rankings in 2018-19. The economic depression circumvented very sector in country, from banks, automobile sector, textile, transport, roadways and retail. To push sinking banking sector and other areas the government asked RBI to open its coffers to pace up dwindling economy.
According to former Prime Minister and Ex-Finance minister the economy is showing a decreasing trend because of mis management of funds by Modi government. The present government stresses on digital transactions more compared to cash payments. Even the digital transactions increased more in past six years than before. In 2017, the then Niti Aayog CEO Amitabh Kant announced that ATMs, credit and debit cards and POS machines will be redundant by 2020 and every Indian will be doing his transaction just by using his thumb in thirty seconds. But at present the cash transaction has increased to 17% after three years of demonetization.
None of the large economies, which surpass India in digital payments, to boost cashless transactions had to go through the painful experience of demonetization. What they did experience, though, was a systematic boost to the infrastructure for digital payments.
The first blow that demonetization hit were the small time investors, un-organized small retailers, shopkeepers who are more comfortable with cash transactions. In addition, another sector is the agriculture and rural economy. Even the Bankers acknowledge that cash is an important part of the rural economy and any effort toward digitization must take into account the usage of cash.
Another reason of economic slowdown in country is the expenses on the election procedures, involving extravagant campaigning, which is now happening years before elections. According to the New Delhi-based Centre for Media Studies (CMS) there has been a 40 percent jump from the $5 billion estimated to have been spent during India’s 2014 parliamentary vote. And it amounts to roughly $8 spent per voter in a country where about 60 percent of the population lives on around $3 a day. In 2019 parliamentary elections more than 500 billion rupees ($7 billion), were spent. According, Anjuv Bhasin EVP-Markets & Corporate Affairs, India Infoline Ltd the 2019 election is the, most expensive election till now on the other hand about $6.5 billion was spent during the US presidential and congressional races in 2016.
The above arguments summarize the lack of management of finances that has led to economic slowdown in India, in spite of having more digitized economy than Japan which still focuses on cash based economy.