With prospects for the Japanese economy still dismal after years of stagnation, Japan-based JCB Co. Ltd. is continuing to look abroad for growth. Since hitting bottom in March of last year, Japanese economic activity has shown signs of “gentle,” but not necessarily sustainable, growth, and it appeared ready to slip back into decline in the first half of this year, according to the Japan Research Institute Ltd., a local think tank.
“Japan is performing least well among the world’s leading economies,” the institute says in a fiscal forecast for 2009-2010.
The Japanese government’s economic stimulus has spurred the anemic recovery, and other dynamics remain grim, the institute says. It projects a short-term 6% decline in gross domestic product, further price deflation, additional loss of capital investment, increasing unemployment, and decreasing salaries and wages. A relatively strong yen seems likely to continue to limit exports, the institute says.
Despite that depressing scenario, JCB managed to eke out 2.5% growth in transaction sales volume for the fiscal year ended March 31, 2009, to 8.35 trillion yen (approximately US$75.5 billion) from 8.15 trillion yen the previous fiscal year. The brand achieved the growth partly by increasing its number of domestic cardholders by 2.9%, to 57.1 million from 55.5 million, and the number abroad by 17%, to 5.5 million from 4.7 million, a JCB spokesperson says (see chart).
JCB achieved double-digit card growth abroad with a major push in China, Taiwan and South Korea, the spokesperson says, noting JCB has acquired 3 million cardholders in China since entering the Chinese market in 2005. The company hopes to amass 10 million cardholders in Asian countries outside Japan “in a couple of years,” she says.
A partnership with Discover Financial Services has brought JCB acceptance at Middle American merchants, and the deal also provides Discover access to millions of terminals abroad, says Scott Strumello, an associate at New York-based Auriemma Consulting Group Inc.
At home, JCB is the official credit card and an official sponsor of Tokyo Disneyland, the Kingdom of Dreams and Magic, and Tokyo DisneySea. Statistics on the Disney relationship, such as number of cards outstanding and purchase volume, can prove difficult to obtain, Strumello says. But JCB may consider the deal successful because it has attracted a major global partner, and Disney probably appreciates the deal’s power to solidify its brand loyalty in Japan, he says.
Changes in Japanese society are benefiting the card industry there, too. Legislation passed in 2007, for example, allows Japanese consumers to pay utility bills with cards, Strumello says. Before then, consumers were required to pay their light and heat bills in cash or with automated clearinghouse funds transfers, he notes. Besides opening the door for cards, the legislation has enabled utilities to reduce costs because they handle less cash, Strumello says. “The utilities have as much of an interest in promoting it as JCB does,” he says of the efforts of both industries to convince citizens to use their cards.
Attitudes toward cards are changing, too. Japanese consumers often pay off their card balances each month, but younger cardholders are showing more willingness to borrow than their parents, Strumello says. The Japanese habit of asking consumers at the point of sale in department stores whether they wanted to receive a bill for the entire amount of a credit purchase or revolve the debt is becoming less prevalent, he says.
Misleading references to the Japanese using cash for 90% of transactions need clarifying because it includes transfers from checking accounts, Strumello says. “It’s not so much that consumers are bringing coins and bills and conducting all their transactions that way,” Strumello says. But coins worth as much as $100 help the Japanese make large cash purchases, he notes. PS
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