Finance Minister Satsuki Katayama said on March 11 that the spread of Chinese smartphone payment apps in Japan, and the emergence of communities operating outside Japan’s legal and regulatory framework, posed “a serious issue.” She said Japan would work with the G7 nations, including the United States and European partners, to address it. Katayama made the remarks in response to questioning from Nippon Ishin no Kai lawmaker Tsukasa Abe.
Income and Sales Could Become Harder to Track
Abe pointed to code-based payment services offered by major Chinese mobile payment providers, such as Alipay. “Even when transactions take place at stores in Japan, the flow of funds is handled through bank accounts and payment infrastructure inside China,” he said. “This means economic activity is being conducted outside Japan’s financial system.” He then laid out a series of concerns.
From a taxation standpoint, Abe said that “even when the underlying economic activity takes place in Japan, tax authorities may struggle to track income and sales if the flow of funds cannot be traced domestically.”
In terms of social integration, he added that “it becomes possible to complete everyday economic activity without using any part of Japan’s financial infrastructure.”
Such an environment, he warned, could encourage the formation of communities in Japan with no point of contact with Japanese laws or institutions. “None of this can be left unaddressed,” Abe said. He added that if authorities are unable to track the transactions, they could also be vulnerable to money laundering.
Abe also asked whether Japan’s current Payment Services Act could be used to regulate such activity.
Ensuring a Fair System
Katayama called the issue “extremely serious.” She said, “Alipay and WeChat Pay probably have close to 100% coverage in China. But in Japan, where some services are linked to bank accounts used here, and others are not, it has probably become extremely difficult in practice to enforce legal registration requirements and exercise supervisory authority.”
Referring to the Sanae Takaichi administration’s efforts on foreign-resident policy, Katayama said, “We have to ensure the system is fair.”
She stressed that, both as the minister overseeing financial services and from the standpoint of the national tax authorities, she felt strongly that the situation “must be corrected.” Katayama added that the issue was likely to draw growing attention within the G7 and said the group ought to take it up. “I intend to keep working on it,” she said.
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(Read the article in Japanese.)
Author: The Sankei Shimbun
