Get Your Suica

Or Icoca, Manaca, Toica, Kitaca, Sugoca, Nimoca, Pasmo, Hayakaken, or Pitapa.

I once wrote that the difference between Singapore and Japan’s contactless cards for public transport is that in Singapore, paying using a contactless card is cheaper than paying in cash because not only do you get discount for using contactless cards in Singapore, you get further discounts for transfers to other public transport in the same trip, while in Japan, you pay the same regardless of whether you use cash or contactless card. The function of the card in Japan is merely for convenience (and also accumulation of points that you can use as electronic money which most people do not know, or use). That is set to change next April when the GST is increased from 5% to 8%.

When Japan first introduced the 3% GST in 1989, and when they increased it to 5% in 1997, they adopted a system of rounding off the GST-inclusive ticket price to the nearest 10 yen (commuter’s pass prices are rounded off to the nearest 100 yen). This was because the infrastructure wasn’t made to accept 1 yen or 5 yen coins, and upgrading the entire nation’s systems to handle that would be very costly. That is why you are still paying a perfectly round figure when taking public transportation here. However, now that contactless cards have proliferated to be a part of the people’s daily lives with over 42 million people using the Suica alone, the pricing system is expected to change with the GST increase next year.

As contactless cards can handle amounts down to the yen, it is no longer necessary to round off transportation fees for users of the cards. This means, if the cost to get from point A to point B is 158 yen, people using contactless cards will pay 158 yen. No more, no less. However, as the machines accepting cash will still not be upgraded, those without contactless cards will have to pay 160 yen (the rounded-up figure in the above example). So, it will be more worth it to get yourself one of those cards. In the other case where if the GST increase results in the cost from point C to point D to be 153 yen, it does sound like using cash would have you pay only 150 yen, but things might not be so straightforward.

The problem with paying by cash being cheaper than using contactless card over certain routes probably still exists (albeit very few and far between) due to the highly complex railway system and criss-crossing between multiple operators. But how this increase will change the railway price is still to be seen. Let’s wait and see what happens.

The good news amidst the unwelcomed GST increase (though not related to contactless cards) is that many business operators (especially those in the apparels and restaurant business) are willing to absorb the 3% GST increase in order to retain their customers. But depending on the economy in two years’ time when the GST is scheduled to increase to 10% in October 2015, consumers might be overwhelmed by what would appear to be a 5% increase if these businesses suddenly find it a burden to shoulder the tax.

Abe’s job now is to make sure the upward trend doesn’t stop, at least for the next two to three years.