Saturday, August 22, 2009

What’s the point? Electronic Money and Point Systems in Japan

This blog post has been written in response to a request for tips on how to live frugally in Japan. Those of you who don’t live in Japan may wish to skip the “What you can do” sections.

When I was a wee boy, I was given a wallet as a present. It was my first wallet and I immediately wanted to fill it up so I could feel more grown up. I received about 10 pounds a week for delivering newspapers and that went inside. Any pocket money I was given also went in. There was one thing that bugged me though. Since I had no credit cards or cash cards, I had nothing to put in the slots dedicated to them. I remember that I was delighted when I was given a library card and put that in.

Oh, how times have changed. I now have the opposite problem. I have so many cards that my wallet is full to bursting and I have another card holder just for containing the overflow. I’m sure that many people experience this problem but in Japan, it’s even worse and I’ll explain why.

Those of you in Japan may not realise this but the price of goods that you see in shops isn’t the lowest price that you can pay for them. Just about everyone in Japan is participating in a game that allows you to pay less. Welcome to the Japanese world of loyalty cards.

In Japan, loyalty cards are often called point cards. If you’ve seriously looked into mileage cards for airlines, you won’t be surprised to hear that this is an insanely complicated subject. Japanese magazines frequently publish articles explaining which point cards offer the best value and how they work. Loyalty systems such as these also tie in with credit cards, mileage cards, electronic money* (see explanation below) and public transport commuter cards like Suica and Pasmo. The magazine Nikkei Trendy has a 47 page extravaganza in the edition that is out right now.

What you can do: the basics

The easiest thing you can do is get yourself something to hold a large number of credit cards and start filling it up with loyalty cards for every shop you go to. I was very concerned with spam when I started doing this because in order to get these cards, you often have to fill out a form giving your address and phone number. I’m happy to report that I’ve never been called by marketing teams. We get a lot of spam mail in the post, but I think that the vast majority of this is for local services and everyone in the building gets it. What I often do when filling out applications for point cards is to pretend I don’t have an email address and I miss out a crucial part of the postal address, like my apartment number.

Whenever you go shopping and make a purchase, hand over your loyalty card and get the points. Usually points are accepted in lieu of cash when making your next purchase. A few days ago at the supermarket, I didn’t want to mess around with small change, so I paid 4000 yen in cash and paid the rest using my points.

Point cards have alliances like airlines do with mileage cards. So you only need one card for many shops. One of the biggest, that you see all over the place, is the T-point system started by Tsutaya, the video rental store. There are a large number of shops in this alliance. Some of them only allow you to collect points (貯める) and some of them allow you to pay with points too (使う). You can use T-points to pay for things and you can also exchange them back and forth (交換できる) with other point systems like mileage at ANA.

What you can do: becoming a point ninja

If you really want to go to town with points, the best thing to do is pick up a magazine where the writers have done the research for you. Nikkei Trendy has published quite a few articles and probably contains the most detail.

The trick is to combine points with credit cards, electronic money and public transport cards. Credit card companies will often team up with point systems and offer deals to make their cards more attractive. Beware though. These deal sweeteners are usually combined with more punitive interest rates so don’t get one of these credit cards if you’re not planning on paying the bill in full every month. If you can pay in full, you have nothing to worry about and it won’t cost you anything.

There are three circumstances where you can collect points:
  1. When you charge your electronic money card or public transport card using your credit card.
  2. When you purchase items
  3. When you ride the train or bus
Ideally, you want to cover all three bases. Here are some tips:
  • When you charge your Suica/Pasmo, don’t use cash at the machine. Instead, set up auto-recharge, which will bill your credit card and refill the balance on your card when it drops below a certain level. You get points for every recharge. You can use these points to pay for subsequent charges of your Suica.
  • Don’t buy stuff directly from Amazon or Rakuten or other online retailers. Instead, access these stores through a points mall, which will multiply the number of points you receive. In some cases by up to 17 times:
    Oki Doki ランド






    and many others..
    Only the first three can be used to access and those three all let you exchange the points for JAL air miles. 
  • Don’t pay for stuff with cash in convenience stores. You could use your credit card, but the quickest way is electronic money. Each chain of convenience stores supports a different player in the electronic money space:
Edy: the dominant player, supported at all convenience stores
Waon: the new kid on the block, supported at Family Mart and Ministop. Growing rapidly.
Nanaco: Seven Eleven
Suica/Pasmo: Most stores
  • If you haven’t done so already, set up air miles accounts with an airline in each of the three global alliances. That way, whenever you fly, no matter which airline you use, you collect air miles using the relevant account. If you’re living in Japan, at least one of these air miles accounts should be JAL or ANA. JAL are part of the One World alliance and ANA are part of Star Alliance. There are credit cards connected to both JAL and ANA. Get one or both and get air miles each time you use it. You can also transfer points from other schemes to air miles.
Those are some general tips and avenues of investigation. Here’s what I’ve done:
  • I already had an air miles account with BMI, who are part of Star Alliance. I therefore chose JAL instead of ANA. I got this credit card (the one on the left), which credits my JAL air miles account with air miles every time I use it. I also get miles when I use it to recharge my electronic money cards.
  • The credit card I bought comes with a WAON card. Every time I use it at the convenience store, I get 15 miles. If I use other electronic money cards, like Edy, I get 10 miles.
  • I have applied for the Tokyo Metro To Me Credit Card that offers an auto-recharge facility for PASMO. Every time it auto-recharges, every time I use it to ride public transport and every time I buy a new commuter pass, I get points. These points can be used to make subsequent purchases. You can also exchange these points for ANA air miles.
  • I live on a subway line where I have to use PASMO to get my commuter pass, I can’t use SUICA. SUICA is generally far better than PASMO with wider acceptance and better deals on credit cards and points. This card gets good reviews, although it is JCB, which is useless abroad.
  • I plan to also apply for an Edy card for the convenience stores that don’t accept WAON. I’m just trying to figure out the best one. A list of the different options is here.
Hopefully the above will give you some ideas if you’re a permanent resident of Japan. There are so many different options and I’m not sure if I have the best combination.

Why are loyalty systems so huge in Japan? Are they good for the economy?

I’m sure that the reaction of many readers will be, “What a hassle, I couldn’t be bothered with that”. It’s different here though - diligence is definitely a Japanese character trait. Of course, there are lazy Japanese people, but I’d say the majority always carefully do their duties and chores. Public facilities are always clean and efficient because of this quality.

It’s easy to see how point systems appeal in Japan. Effort and diligence are rewarded. It’s as simple as that. I try explaining to people that companies budget for these loyalty schemes by raising the basic price level to accommodate the discounts. If they didn’t bother, we could all pay less and save time too. Despite these attempts, the general attitude is that getting the best deal is a game and that point schemes make this interesting. It’s all very popular.

I’ve been wondering recently about the effect that the point systems have on the Japanese economy. As long as loyalty schemes are small scale and cover individual companies as they generally do in the west, I’m sure the effect is small. However, when you have enormous schemes like T-point, whose participating companies must account for an enormous amount of revenue in total, the effect may be much larger. How do you measure inflation when people are paying prices that are lower than those reported by the companies? Japan’s deflationary problem is well documented. Could it actually be worse than reports suggest due to points systems? Maybe I’m taking things too far but I really can’t emphasize how huge this is.

* Electronic money (電子マネー) is the Japanese term for IC chips inserted into cards and mobile phones, allowing you to tap contact areas and have the money taken from the chip wirelessly. In most other countries, this technology is restricted to public transport cards like Oyster in London and Octopus in Hong Kong. In Japan, the equivalents in Tokyo are called SUICA, for Japan Rail and PASMO, for the metro. These are now integrated so you can use either anywhere and you can use them on the bus too. There are lots of other equivalent cards in different areas of Japan like ICOCA and PiTaPa in the Kansai area and Kitaca and SAPICA in Hokkaido. Public transport isn’t the only area where you can use electronic money, you can take your SUICA card and use it in shops and with vending machines too. There are also other electronic money service vendors, like Edy, who offer the same service, but you can’t use these cards on public transport.

Photographs taken by (in order of appearance)


  1. Thanks, it's helpful:)

  2. Wow! You really did your homework. Nice wrap-up!
    I mostly only get point cards for the places I go often or where the points rack up fast - Bic Camera, Lawson, Marunouchi, and the restaurant down the street from my office. I got turned down twice for the To Me card.
    Oh - don't forget that you can use Waon at Aeon department stores, restaurants, etc. I love how it barks when you use it!

  3. I applied for the Waon card after doing research into this post so it should be coming. I didn't realise it was linked to the credit card I already had and I had no idea that it barks! That's hilarious.

    If they won't give you the To Me card, I think you can get auto-recharge set up with a different credit card, if it's a Japanese one. I should have done that ages ago. I reckon it will really help out when I'm low on cash and there's no ATM in sight.

  4. Awesome article, though instead of using a portal site to buy from Amazon how about just opening your own affiliate ID and sharing it with friends, and get them to do the same. Use their ID whenever you shop, and get them to use yours. I forget what the current payout rates are, but I think it's between 1% and 4% depending on the number of sales in one month. I'll have to check out those portal sites and see which is a better rate I guess.

    @Japandra - thanks, you've made me want a Waon card just because it barks. Dammit!

  5. Sorry, not following you on that one. How do you set up an affiliate ID? If you share it with friends, does that mean that they're buying stuff using your credit card?

  6. I have a wallet full of point cards. The only one that ever gives me anything free is from my grocery store, and usually its in the form of curry.

  7. Always read stuff that will make you look good if you die in the middle of it.............................................

  8. Great article! I am afraid that if you don't speak Japanese and can't read Nikkei Trendy you won't get as much out of it as a Japanese speaking person. So far, personal card collections is limited ...

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