I think the main reason credit cards didn’t become popular is because Japan’s domestic market is very underdeveloped compared to the US. While small businesses (usually defined as 200–500 employees) make up something like 98% of the US’s economy, even smaller mom-and-pop businesses are the majority in Japan. Even in Tokyo there are a vast number of shops that are family run; usually the first floor is the shop and the second floor is the family’s residence. Zoning seems to be a new concept still, as anything equivalent to imminent domain is very weak so a single person can block a development project, which is one practical limitation to large centralized businesses. Chain stores are increasing but still don’t have nearly the power or reach that they do in the US.
For example, where I live is semi-rural by Japanese standards, about 20,000 people, adjacent to small city of 50,000 people or so. There’s practically no separation, so they’d be considered the same town/area in the US. There is a single department store here, and that went out of business a couple of years ago (they were bought out by a different department store company, though). Nearly every shop here is a single-building private business/residence. While there is a trend toward bigger businesses and chains in Tokyo and larger cities, even there the domestic market is very fragmented and small-scale.
In California, I went to high school in a similarly sized place, population of about 50,000. In contrast, there were a few strip malls, a Target, a K-Mart, and a WallMart which was built the year I graduated. Even near my grandmother’s place up in the foothills, there were a couple of big chain stores and attached strip malls built to service an area that probably had less population, more isolated by far, than my current town in Japan. There were very few small private businesses.
These small Japanese businesses usually have low margins, and credit card transaction fees would probably eat into those. I’m not sure if vendors have to buy the credit card readers, but I’ll bet that they do; that’s an additional expense. There aren’t many business or vendor associations for collaborative bargaining, which might offer better deals for local businesses with the credit card companies.
Couple those practical reasons with the incredible inertia of Japanese society, and the “short” history of credit card usage in Japan (from the 1960s vs. from the 1930s in the US) and you run into some cultural blocks.
As an example, the cracks in the personal guarantor system for large purchases, and particularly residence rent or mortgages, are just now appearing. Guarantor companies are starting to fill the gaps in modern Japanese society, where it’s not always possible to find a relative or friend who is willing to be personally responsible for your debts if you default on a loan or can’t pay your rent. The 保証人 (guarantor) system has held for generations past the point where it probably should have given way to a more flexible and financially mature system. Such systems in the US had mostly disappeared by the 1950s or 60s, as far as I know.
I’ll be moving soon, and this will be the first time I’ve ever gone through a company rather than having to find an individual who could serve as my guarantor. My Japanese wife was surprised to find that such a business even existed; she thought we were going to have to use her father as a guarantor.
The relatively quick adoption of suica electronic payment vs. credit cards is partly because of the the home-grown nature of the service. They also supported it really well. There was integration with the train lines when it was first introduced, and it branched out into the immensely influential mobile phone market from there. In addition, electronic transfers had already become more established by 2000 (when I first came here) than they were in the US. Americans had adopted ATM pay points to a much greater extent than I ever saw in Japan, but direct deposit and other electronic payments between banks were still fledgling, and are probably still utilized less by private citizens than they are in Japan.
Nearly all of my bills (rent, power, credit card, water, gas) are paid by direct automatic bank transfer. In some cases, it’s difficult to opt out of such an arrangement since it offers such an advantage to the companies in getting payments on time, and shifts the burden of fee collection partially to the bank. In the US, direct transfers are still distrusted to a certain extent, probably because the more primitive (IMO) check system already existed and had a long history while offering some convenience and protection vs. cash. In Japan, people moved from cash to bank transfers with no middle ground, so it had faster uptake.
While revolving credit does exist, it’s not automatic the way it is with US card companies. The option to pay once or twice is usually dictated by the vendor, not the credit card company, and it’s very uncommon to offer longer payment periods. Any revolving balance on cards that I have requires negotiation with the credit card company to arrange an alternate payment schedule. Where Japanese people usually get themselves in trouble with credit is with cash advances on their credit cards, or getting money from loan agencies, サラ金, which are a bit like check cashing places.