Lift of the ban on digital wage payments in Japan
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Lift of the ban on digital wage payments in Japan

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Shin Mitarai of Nagashima Ohno & Tsunematsu explains why the impact of the lift on the fund transfer businesses in Japan is expected to be significant

Wages are generally paid by bank transfer in Japan, but recently there has been active discussion about the lift on the ban of digital wage payments, in which wages are paid through cashless payment service. The background and merits, current Japanese regulation and details of discussion regarding the introduction of digital wage payments are discussed in this article.

Background and merits

With the spread of the cashless service, more people are using cashless payment services to make daily payments. For such people, it is more convenient that their wages are paid via cashless payment services. 

In addition, the number of foreign employees is increasing in Japan but it is not necessarily easy for some foreign employees to open a bank account. Digital wage payments are useful to pay wages to such foreign employees. 

Digital wage payments are also beneficial to employers because it often requires less paperwork and has lower fees than bank transfer.

Current regulation

Under the Labour Standards Act, wages must be paid in currency. The examples of currency are banknotes and coinage. This provision is intended to prohibit payment in kind, whose value is unclear and which is inconvenient to exchange, and to guarantee payment of wages in currency, which has been considered as the most advantageous means of exchange. Digital wage payments violate this current regulation.

On the other hand, since it is not practical to pay all wages in banknotes or coinage, payment other than in currency is allowed as long as it is a method that ensures reliable payment of wages and is approved by the Ordinance (the Ordinance) of the Ministry of Health, Labour and Welfare (the MHLW). Bank transfer is approved by the Ordinance as the method to pay wages other than in currency. In order to lift the ban on digital wage payments, the amendment to the Ordinance to add the digital wage payment method as such exceptions is currently under discussion at the MHLW.

MHLW’s discussion is based on the premise that digital wage payments should be as reliable as a bank transfer, and conditions for cashless payment services to meet such reliability is discussed below.

MHLW’s view

The following conditions are considered to be required for cashless payment services to be used for digital wage payments and these conditions are considered to be included in the Ordinance.

Protection of funds

As wages are a means of livelihood security for employees, a framework to ensure that wages are paid even in the event of the bankruptcy of fund transfer service providers operating digital wage payments will be required.

Measures against unauthorised access

Cashless payment services must be as secure as bank transfer to protect wages from unauthorised access. In addition, fund transfer service providers will be required to have a system to compensate for losses incurred by employees due to fraudulent transactions.


From the perspective of ensuring the livelihood of employees, cashless payment services used for digital wage payments will be required to allow flexible withdrawals, such as in units of ¥1, and to allow withdrawals at least once a month without charge.

Necessity of supervision by the MHLW

Fund transfer service providers shall be under supervision of the MHLW if they deal with digital wages payments and they will be required to have a system that can report the implementation status of wage payments to the MHLW in a timely manner.

Consent of the employee

Since the consent of the employee is required for wage payments via bank transfer as an exception, such consent will also be required for digital wage payments.

Amendment to the Payment Service Act

Amendment to the Payment Services Act came into effect on May 1 2021. Before the amendment, remittances under the funds transfer business were limited to ¥1 million per transaction. 

Under the amendment, a new category (‘Type I Funds Transfer Business’) that permits the remittance of over ¥1 million was established. Moreover, another new category ('Type III Funds Transfer Business') that sets the maximum amount of remittance per case at ¥50,000 was established. The fund transfer business before the amendment now falls under ‘Type II Funds Transfer Business’.

Although no conclusion has been reached as to which of the three types of fund transfer businesses will be allowed to handle digital wage payments, Type I Funds Transfer Business license is required to pay wages of over ¥1 million per payment. However, as of January 31 2022, there are no companies which have Type I Funds Transfer Business license.


No announcement has been made yet as to when the ban on digital wage payments will be lifted, but the impact of the lift on the fund transfer businesses is expected to be significant. Discussions should be followed closely.



Shin Mitarai

Associate, Nagashima Ohno & Tsunematsu






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