• Kyodo

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The labor ministry on Monday proposed reforms that would create a system within the current fiscal year to allow companies to pay salaries in digital money, a further step in government efforts to introduce digital payrolls and promote a cashless society.

The government has been working out the reforms involving revisions to the ministry ordinance amid safety concerns and opposition over digital wage payouts from the banking industry.

The planned digital payment is being pushed by the government to help people avoid touching cash amid the coronavirus pandemic. It could also make it easier for foreign blue-collar workers, who often struggle to open bank accounts in the country, to receive salaries without having to do so.

The ministry proposed during a meeting of its panel subcommittee on Monday that in pushing for such reforms, mainly through smartphone-based settlement apps, it would be imperative to ensure safety in using this system.

A revision of the ordinance is necessary to enable digital payments through smartphone-based settlement apps.

Under a draft proposal, the Health, Labor and Welfare Ministry will identify who among the digital salary payment service providers can transmit the funds. They will be chosen based on whether they can compensate for losses that could be incurred by their business failure or illicit withdrawals.

The ministry also wants to enable workers to withdraw their salaries in cash through automated teller machines, according to the draft.

The government had aimed to craft the specifics of the system within fiscal 2020 that ended last month, but the plan was delayed due to challenges including how to ensure safety in digital salary payments.

"We want to get (the scheme) institutionalized in the early stage of fiscal 2021" from April, labor minister Norihisa Tamura said in a news conference earlier this month.

Although the government has set the goal of raising the ratio of cashless settlements to 40% by 2025, the percentage stood below 30% in 2019 and lagged behind other developed economies.

Among private companies, Yahoo Japan Corp. has said it will pay ¥50,000 ($460) each to all of its employees through smartphone payment service PayPay to make up for expenses related to remote working amid the pandemic, including for desks for work purposes and telecommunication tools for web conferences.

As a precursor of digital salary payments, the major online service provider is looking into problems linked to the one-off benefit.

For the public, concerns over the safety of digital payroll stem from lax regulations for money transfer firms compared to financial institutions. While the government's payoff program can protect a maximum of ¥10 million per depositor in the event of a bank failure, the rule does not apply for money transmitters.

Fears persist over fraudulent withdrawals since cases targeting bank accounts linked to e-money services provided by major mobile carrier NTT Docomo Inc. were confirmed last year.

Conventional banks remain opposed to the deregulation largely because having accounts for salary payments helps them promote their businesses to customers.

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