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The number of small and midsize businesses registered for a cashless payment program, introduced by the government to reduce the negative effects of a hike in the consumption tax last October, topped 1 million in mid-February.

The nine-month program set to run through June appears to have been widely accepted in society, with the number of businesses registered doubling, from around 500,000 at the time of the tax increase, within four and a half months, an official at the Ministry of Economy, Trade and Industry said.

Along with the tax rate increase, from 8 percent to 10 percent, the government introduced the program to refund up to 5 percent of payments for goods and services purchased from small and midsize businesses, such as retailers and restaurants, if the purchases were made using cashless payment methods such as credit cards and QR codes on smartphones.

The refund is made in the form of points that are accumulated and used later for other purchases. The program was aimed at preventing a drop in consumer spending following the tax hike and stimulating consumption to raise the share of cashless payments in Japan, which is lower than other Asian countries such as China and South Korea.

The government has set aside a total of ¥700 billion to promote the program in its budgets for fiscal 2019 and 2020. There were 1.04 million registered businesses across Japan as of March 1.

With the program applicable to an estimated two million firms, the ministry official said it had "made a certain advance" in terms of promoting cashless payments.

But the refund system and other measures taken by the government to stimulate consumption cannot fully compensate for the negative impact of the tax increase.

Japan’s economy, as measured by gross domestic product, shrank an annualized 7.1 percent in price-adjusted real terms in the October-December period from the previous quarter, due to a sharp fall in personal consumption, among other factors, according to revised government data.

Since the start of this year, the spread of new coronavirus that causes COVID-19 respiratory infections has seriously affected the domestic economy, due to significant constraints on social activities.

In its monthly economic report for March, the government dropped its assessment that the nation's economy was "recovering at a moderate pace" and said it was in a "severe situation," sharply depressed by the pandemic.

In response, government officials and economists are starting to call for the government to continue the tax refund point program beyond its scheduled expiration at the end of June.

From the outset there had been doubts over the program, with some noting that the benefits to elderly consumers would be limited because of their lack of familiarity with smartphones and other digital payment technology.

As the digital divide can directly affect people's daily lives, some government officials have stressed the need to take the digitally disadvantaged into consideration.

In January, New York City Council members voted to require retailers and restaurants to accept cash for payments in order to prevent discrimination against people without access to credit cards and other cashless payment tools.

With New York's stance clearly different from Japan's policy of encouraging cashless payments, a senior ministry official emphasized the importance of promoting cashless payments, saying that cash was still widely used for payments in Japan.

But the official also noted that a payment system accessible to anyone is needed, as well as the refund program and other measures, saying, "There cannot be services and policies that leave the elderly behind."

The ministry is looking at analyzing elderly consumers' payment methods in order to introduce measures that protect them from scams and in their daily lives, officials said.

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