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<p>This paper examines the future trajectory of cash demand in Japan, amid rapid demographic aging and the increasing adoption of cashless payments. Despite a decline in cash use for daily transactions, aggregate cash demand has remained stable, likely due to cash hoarding by older generations. Using 2021 survey data that distinguishes between cash on hand (COH) for daily use and cash at home (CAH) for hoarding by age group, we project cash demand through 2070. Our baseline scenario assumes constant cash-holding behavior by cohort. Adjustments for the underrepresentation of high-cash-holding households are made using methodologies from the distributional national wealth literature, which employs Pareto distributions to align microdata with aggregate statistics. Results suggest that COH will decline by 1.5% annually, and CAH will decline by approximately 1% annually. These decreases outpace the projected 0.7% annual decline in population. We also find that a 1% rise in deposit rates would cause a 20% decrease in CAH demand, a much stronger effect than demographic aging. Finally, we discuss the implications for the Bank of Japan’s balance sheet, as declining cash demand could increase the Bank’s cost burden during monetary tightening.</p>

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Cash demand and demographic changes in Japan

  • 期刊论文

  • 发表日期：

    2026年2月3日

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  • Hiroshi Fujiki

摘要

This paper examines the future trajectory of cash demand in Japan, amid rapid demographic aging and the increasing adoption of cashless payments. Despite a decline in cash use for daily transactions, aggregate cash demand has remained stable, likely due to cash hoarding by older generations. Using 2021 survey data that distinguishes between cash on hand (COH) for daily use and cash at home (CAH) for hoarding by age group, we project cash demand through 2070. Our baseline scenario assumes constant cash-holding behavior by cohort. Adjustments for the underrepresentation of high-cash-holding households are made using methodologies from the distributional national wealth literature, which employs Pareto distributions to align microdata with aggregate statistics. Results suggest that COH will decline by 1.5% annually, and CAH will decline by approximately 1% annually. These decreases outpace the projected 0.7% annual decline in population. We also find that a 1% rise in deposit rates would cause a 20% decrease in CAH demand, a much stronger effect than demographic aging. Finally, we discuss the implications for the Bank of Japan’s balance sheet, as declining cash demand could increase the Bank’s cost burden during monetary tightening.