Improving economic conditions and rising consumer spending following the easing of COVID-19 restrictions will drive the growth of the Japanese credit card payments market by 7.8% in 2022, according to GlobalData, a leading data and analytics company.

According to GlobalData’s Payment Cards Analytics database, the value of credit card payments in Japan is estimated to have increased by 8.4% in 2021 with the easing of government restrictions, businesses reopening, and a rise in economic activities. The market’s value is forecasted to register a compound annual growth rate (CAGR) of 6.4% between 2021 and 2025, to reach JPY103.3 trillion (US$897.6 billion) in 2025.

Nikhil Reddy, Senior Payments Analyst at GlobalData, comments: “Japan has a highly evolved credit card market with an average individual holding more than two highly used cards. As cashless payments have increased in popularity, payment cards, especially credit cards, have been the main beneficiary. This has been supported by a well-developed payment infrastructure, high consumer preference and merchant acceptance.”

The Japanese payment card space is dominated by credit cards, which accounted for 96.5% of total card payment transaction value in 2021. The frequency of credit card use for payments also remains high at nearly 50 uses per card per year in 2021, compared to the debit card’s 1.4 uses. This is primarily due to the reward benefits, flexible repayment facilities, and wider acceptance among merchants.

Despite a high penetration of 3.7 cards per individual, payments where debit cards were used remain stubbornly low in Japan. Debit cards only account for 3.5% of the total card payment transaction value as they are primarily favoured for cash withdrawals, which account for 73.2% of the total debit card transaction value in 2021.

Reddy concludes: “Credit cards will continue to dominate the overall Japanese card payments space, supported by high consumer awareness and government initiatives to promote electronic payments. The credit card market quickly rebounded from the economic turmoil caused by the COVID-19 pandemic and the uptrend is likely to continue over the next five years supported by economic recovery and easing of international travel restrictions.”