Japan intends to exclude foreign digital payment services such as Alibaba Group Holding's Alipay from a rebate program for cashless purchases, a measure designed to cushion the blow from a consumption tax hike coming next October.
Visitors from overseas also will be unable to take advantage of the government-subsidized rewards program, which is aimed at promoting the spread of cashless payments as well.
Consumers who pay by smartphone, credit card or other cashless means can receive reward points worth up to 5% of their purchase value for a limited time, redeemable on future purchases, once the consumption tax is raised by 2 percentage points to 10%.
Payment operators such as credit card companies will need to cap their fees for small and midsize stores at 3.25% in order to receive subsidies for the customer rewards program, regardless of payment method. The program will be limited to companies working mainly in Japan, leaving out services like Alipay, a popular option in Alibaba's native China.
Eligibility generally will be limited to Japanese residents, as they bear the burden of the consumption tax. Foreign visitors are exempt from consumption taxes on purchases above a certain price.
Points will be unavailable for some large goods slated for separate tax breaks, such as cars. Major franchise chains like convenience stores will offer 2% reward points, in effect refunding the value of the newly added consumption tax.
The subsidies are geared to help small retailers. Besides shouldering roughly one-third of their fees to payment operators, the government also will subsidize the cost of cashless payment devices for such shops.