It is likely that 1-Yen coins will soon go out of use. Japanese economy changes fast, it employs new payment methods, it adjusts its tax policies. Let’s take a closer look at the reasons that might accelerate the disappearance of the smallest Japanese coin:
- New consumption tax.
- Its influence on pricing.
- The spread of e-banking.
- The price of minting new coins.
Taxes and Prices
One of the reasons for lesser use of a 1-Yen coin is the tax rates. While the consumption tax and prices have been steadily growing, the use of the cheapest coin has been decreasing. It all started in 1989 when Japan has introduced a 3% consumption tax. The government thought people will need to use more change and minted about JPY 2 billion worth of 1-Yen coins. They kept doing so for the next three years.
However, in 1993, Japan minted only half of that amount. Ever since then the production kept on shrinking. In 1997, there was nearly JPY 40 billion worth of these coins in circulation. And the situation did not change until 2009. However, it was also in 1997 that the consumption tax rose to 5%. The percentage suggested that prices would gravitate towards rounder sums. Subsequently, there is not much use for 1-Yen coins.
It costs about 3 Yen to produce a 1-Yen coin.
In 2014, the consumption tax reached 8%. This number suggests that prices would not be as round as before, thus, people would need more change. Yet, the Government of Japan did not increase the production of 1-Yen coins to meet this demand. Minting amounts kept on falling down.
Minting became virtually non-existent in 2017 and 2018, when only 448,000 new coins worth 1 Yen came out from under the press. As Japan anticipates the new jump in the consumption tax to 10% in October 2019, it is only logical to assume that prices will tend to be rounder.
The Rise of e-Banking and Minting Costs
Another factor that hints disappearance of change is the rapidly spreading e-banking. In 2016, the value of electronic transactions was around JPY 5 trillion. This is a 7-time increase since 2008. The Governments aims to have 40% of all transactions to be cashless by 2025.
It is faster and easier for payers, but it is also financially sound for the country’s budget. Currently, 1 yen is the smallest denomination of the Japanese currency, followed by 5, 10, 50, 100, and 500 Yen coins that are not available as paper banknotes. Japan started to use 1-Yen coins in 1871. At that time they were silver.
Today these coins are made of aluminum, which is rather cheap and not very durable material. Nevertheless, it costs about 3 Yen to produce a 1-Yen coin. By decreasing the use of cash and eliminating smaller coins from circulation Japan can save on production, transporting, and storing of these coins.
There are no official statements, regulations or procedures in place to take 1-Yen coins out of circulation. It is not even yet a matter of discussion. However, it is easy to see how the change will accumulate over time in consumer’s wallets and pockets after the new consumption tax comes into force and people switch to e-banking.
Now, what to do with the rest of the coins? Well, one may use them for measurements because each coin weights precisely 1 gram. These coins are also floating on still water, which is a fun trick to show in a physics class. Despite the absence of inflow of new coins, the amount of those in circulation keeps of dropping. Maybe because it is easy to lose such a small coin, maybe because they are easy to break. In any case, it won’t be long before we see how the situation will unfold.