Chinese Smartphone Payments Being Used In Japan: Press Conference by KATAYAMA Satsuki, Japan Minister Of Finance And Minister Of State For Financial Services

I would like to ask about your remarks in the Diet the other day concerning Chinese smartphone payments being used in Japan and the emergence of living areas operating outside Japan’s laws and regulations. You have stated that this is a serious problem. Could you please clarify which aspects you consider problematic, and what measures the Financial Services Agency (FSA) plans to implement going forward?

This diagram illustrates the payment flow. In the case of Alipay, which is widely used, when Japan’s PayPay acts as the acquirer, transactions pass through a bank account. In the scenario shown on the right, funds can be exchanged and converted into cash. Of course, there is some consideration of economic benefit involved, but all domestic transactions are taxable. Irrespective of nationality, these transactions constitute Japan-source income and Japan-source commercial activity subject to consumption and income taxes. Nevertheless, there are two serious concerns: the weakness of mechanisms to capture such transactions for tax purposes, and the ineffectiveness of money-laundering checks. As both Minister of Finance and Minister in charge of financial affairs, I view these issues as problematic from both perspectives, a point I believe was largely made clear in my earlier answer. Actually, after that question-and-answer session, I contacted a Japanese national I had met during my visit to Alibaba Headquarters in Hangzhou when I served as Minister for Regional Revitalization and Regulatory Reform. The company is Alipay’s original parent company, where he held a position close to the top of the company. However, Alipay is now effectively separated from Alibaba owing to the firewall. After speaking with this person and having them share everything they could within the scope of their job responsibilities, I understand that certain anti-money laundering measures are in place, such as limiting transaction amounts. Even so, I gained the impression that these measures are not equivalent to those applied in ordinary domestic transactions between Japanese residents, where information is available through the banking system. I understand that those who have raised this issue are expressing a sense of unfairness. The referenced company has pointed out that Japan is not the only country facing this problem, France, in particular, is a G7 country, and Finance Minister Lescure is scheduled to visit Japan this evening for a Japan-France meeting. Given that these countries receive large numbers of tourists and have many foreign residents, it is only natural that such issues arise, and the situation in Thailand is similar. This means that we should learn from how other countries are responding and take measures in a way that does not create a sense of unfairness from the public’s perspective. At the same time, from the standpoint of national taxation, we must properly address cases where business activities are clearly being conducted despite insufficient evidence of tax payment. While it is true that funds are being transferred even if limited to small amounts, this does not allow for the same level of verification as that conducted by ordinary financial institutions. With regard to these matters, I conveyed them to Minister Onoda, this morning after the Cabinet meeting, as she serves as the comprehensive point of contact for this issue, asking where this issue should be addressed under the framework of orderly coexistence with foreign nationals. On this point, we share a common understanding with Minister Onoda.