Japan Likely to Discontinue Checks and Promissory Notes Due to Concerns of Harm to Small Businesses

The Yomiuri Shimbun

2:03 JST, March 24, 2025

Promissory notes and checks, which have been widely used by companies to make payments between themselves, are likely to be discontinued at the end of fiscal 2026, The Yomiuri Shimbun has learned.

This is because the Japanese Bankers Association (JBA) decided to close down its electronic clearing system for promissory notes and checks in April 2027.

An official announcement about the decision is expected as early as the end of the month.

In the past, financial institutions would exchange paper promissory notes brought in by customers, such as small or midsize enterprises and shops, at a clearing office opened during the Meiji era (1868-1912). When the clearing office was shuttered in 2022, the electronic clearing system was established as an immediate alternative that would be run by the JBA.

Now financial institutions convert paper promissory notes and checks into electronic images and send them through the clearing system to other financial institutions. There were strong calls to scrap the system because of the complicated procedures for paying off and cashing promissory notes.

Promissory notes and checks are a type of security. The issuer enters the amount of money to be paid on the form and hands it to the other party. The amount entered is then transferred from the payer’s account to the recipient when the document is delivered to a financial institution. While checks can be cashed on the day they are received, notes are paid off on a date agreed on by both parties.

The promissory notes system also allows those unable to make payments to do so later if they are having problems with their cash flow. There are concerns, however, the system could put pressure on the bottom line of subcontractors, who often are the ones receiving payment, and that delayed remittance of notes could lead to bankruptcies.

In 2022, the government asked the business community to consider sunsetting promissory notes by 2026, as such payments can lead to large companies bullying small and midsize firms.

On March 11 this year, the Cabinet approved a bill to revise the Subcontract Law that would ban payment by promissory notes.

In 2024, the JBA’s clearing office handled a total of 23.33 million notes and checks, among other securities, that were worth ¥75.02 trillion, which was only about 1.5% of the securities’ peak value of ¥4.797 quadrillion in 1990.

The number of notes and checks handled was down to a twentieth of the 1979 figure of 434.86 million. Demand for the notes is still high, however, mainly among small and midsize firms and local shops.

The JBA is encouraging businesses to shift to its online payment network, which can be accessed without an online banking account and does not require payment of the stamp tax.

It will still be possible for companies and financial institutions to exchange notes and checks by post or other means after fiscal 2026, but very few financial institutions are expected to continue to accept them.

About 40 industry groups, including for automotives and distribution, have called for the discontinuation of promissory notes and checks by 2026.