Japan to end promissory note exchanges at electronic system

Tokyo, March 24 (Jiji Press) -- The Japanese Bankers Association, or Zenginkyo, plans to terminate the exchanges of promissory notes and checks at its national electronic clearing system in April 2027.

Companies and financial institutions will still remain able to exchange such financial instruments among them including by mail.

However, many financial institutions will stop handling promissary notes and checks, making it difficult to continue using such instruments.

The government aims to abolish promissory notes and paper checks in 2026. Japan's three megabank lenders including Mitsubishi UFJ Financial Group Inc. are set to terminate the issuance of such instruments within fiscal 2025 through March 2026.

Zenginkyo will promote a transition to online banking and electronically recorded monetary claims, which are settled automatically at due dates.

In the past, financial institutions took promissory notes they received from customers to clearing houses for settlement.

The country in 2022 replaced the clearing houses with the electronic clearing system, which exchanges instruments using their image data.

Promissory notes were widely used by smaller companies because payments can be deferred to later dates. But calls for abolishing the notes increased, given strain on payees' financing and complicated procedures at financial institutions.