Promissory notes and checks, long used by Japanese businesses for inter-company payments, are set to be discontinued by the end of fiscal 2026, The Yomiuri Shimbun has learned. The move follows a decision by the Japanese Bankers Association (JBA) to terminate its electronic clearing system for these financial instruments in April 2027.
An official announcement is expected by the end of this month, marking a major shift in Japan’s financial infrastructure and payment practices. The decision reflects the growing push to modernize transactions and ease burdens on small and midsize enterprises (SMEs), which have been most affected by the delays and complications tied to promissory note usage.
The system, originally based on the physical exchange of paper promissory notes and checks at clearing offices dating back to the Meiji era, transitioned to an electronic format in 2022. In the current setup, financial institutions scan the documents into electronic images and exchange them through the JBA’s clearing platform. However, the process remains cumbersome and outdated in the digital age.
While checks are payable immediately, promissory notes are typically settled at a later date agreed upon by the parties, giving leeway to companies facing temporary cash flow issues. However, this has also enabled delayed payments and placed financial pressure on subcontractors awaiting funds. In response, the Japanese government urged the business sector in 2022 to consider ending the use of promissory notes by 2026, citing concerns over payment practices that disproportionately disadvantage smaller firms.
On March 11, the Cabinet approved a bill to revise the Subcontract Law, aiming to ban payments via promissory notes. The proposed revision is part of a broader effort to protect SMEs from delayed payments and strengthen fair trade practices.
Although still in use—especially among smaller businesses and regional retailers—promissory notes and checks have seen a sharp decline. In 2024, the JBA clearing office processed 23.33 million notes and checks totaling ¥75.02 trillion, a stark contrast to the peak value of ¥4.797 quadrillion in 1990. The total volume now stands at just 1.5% of that peak.
Despite this, the JBA notes that demand remains high in some sectors. Approximately 40 industry groups, including those representing automotive and distribution sectors, have expressed support for phasing out these instruments by 2026.
In anticipation of the transition, the JBA is urging businesses to adopt its new online payment network, which is accessible even without an online banking account and avoids the stamp tax traditionally applied to promissory notes.
While some businesses may continue exchanging paper-based notes and checks via mail or other means after fiscal 2026, most financial institutions are expected to cease accepting them entirely.
