Japan to allow wage payments to digital wallets from April

Japan is planning to start allowing companies to pay wages to digital payment apps like PayPay and Rakuten Pay from April, the labor ministry said Wednesday, in a bid to promote cashless payments as a way to stimulate the economy.

The maximum balance of such digital wallets will be set to 1 million yen ($6,800), with employees able to use the funds to make purchases or remittances directly.

The upper limit was determined amid concerns that app users cannot be protected sufficiently. Unlike banks, operators of the apps are not subject to the nation's deposit insurance system, which covers principal of up to 10 million yen in case of bankruptcy.

The ministry on Wednesday approved a draft revision to a relevant ordinance.

While the revised ordinance is expected to come into effect in April, its implementation is unlikely to begin until several months later. Screening of app operators must be completed first, and companies considering digital wage payments also have to obtain consent from employees, the ministry said.

The operators will be required to immediately transfer balances exceeding 1 million yen to bank accounts and to fully compensate losses incurred due to bankruptcy or unauthorized transactions, among other conditions.

© Kyodo News