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The government’s shopping point reward program for promoting cashless payments, which appears to have had only a limited impact on consumption, is ending Tuesday.

The program was introduced last year to mitigate the impact on spending of the October consumption tax hike from 8 percent to 10 percent.

Under the program, the government has reimbursed up to 5 percent of the value of purchases in the form of points to shoppers making cashless payments at registered stores.

The government spent as much as ¥775.3 billion on the program, which was joined by 1.15 million small and midsized stores — over 50 percent of the 2 million targeted shops.

But the program failed to prevent private consumption from slumping after the tax hike. Reflecting the chilled consumer sentiment, the nation’s gross domestic product contracted at an annualized pace of 7.2 percent on price-adjusted real terms in October to December 2019.

“As the point program was complicated and not user-friendly especially for older generations, its effect of boosting consumption was limited,” said Hiroko Ogiwara, a critic and freelance business reporter.

Meanwhile, the proportion of cashless settlements grew to 26.8 percent in 2019, up 2.7 percentage points from the year before, thanks partly to the government program.

So far this year, “the spread of novel coronavirus infections has been promoting cashless settlements,” out of fear that pieces of physical currency may be contaminated by the virus, noted Hideo Kumano, chief economist at the Dai-ichi Life Research Institute.

But the end of the reward program may slow the nation’s shift to cashless methods.

“If the government still wants to achieve its goal of raising the share of cashless payments to 40 percent by 2025, it should lower hefty fees shops are paying to cashless settlement service providers,” said a senior official of the Japan Chamber of Commerce and Industry.

The rate of cashless transactions stood at 20 percent in 2016.

Government estimates based on 2015 data from the World Bank, the Bank for International Settlements and other organizations show Japan’s cashless rate was 18.4 percent, versus 60 percent in China and 89.1 percent in South Korea.

To achieve METI’s goal, officials believe the key is to make noncash payments customary at small stores, which was one of the reasons that the government came up with the reward program.

Smaller stores traditionally shun credit cards because of processing fees, which roughly range between 3 percent and 5 percent for each payment.

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