Japan has just introduced new bills for the first time in 20 years. On July 3, the Bank of Japan (BOJ) began issuing new 1,000, 5,000, and 10,000 yen bills, each featuring a prominent figure from Japan’s recent history and enhanced with anti-counterfeiting technology. This change has posed a dilemma for many businesses, who are torn over whether they should encourage cashless payments or continue accepting cash.
The reason is simple: In a country like Japan, where physical cash still reigns supreme, there are millions of vending machines scattered everywhere, and many of them won’t be able to accept the new bills.
Making a debut. Japanese will always remember July 3, 2024. On that day, the BOJ issued a new series of 1,000, 5,000, and 10,000 yen bills, totaling 1.6 trillion yen. These banknotes feature portraits of prominent figures from Japan’s history, including Shibusawa Eiichi, Tsuda Umeko, and Kitasato Shibasaburo. The three of them were influential figures in Japan’s economic, cultural, and social life during the late 19th and early 20th centuries.
Why the change? The decision is significant for several reasons. First, it had been two decades since Japan issues new bills. Secondly, beyond the portraits and their symbolism, the BOJ wants to make it even more difficult for people who traffic in fake money. Their activity has already declined significantly, with only 681 counterfeit bills detected in 2023, far from the nearly 26,000 in 2004. To advance along these lines, the new designs, which will coexist with the old ones and still be legal tender, will include extra shielding.
“These notes come with the latest security features, including 3-D holograms,” the Bank of Japan said. The Arabic numerals indicating their face value have also been enlarged to make them easier for foreigners to handle.
“A spark to the economy.” The introduction of new banknotes could have additional effects on the country’s economy. During the July 3 press conference at the Bank of Japan, Prime Minister Fumio Kishida expressed his hope that the new bills would “[add] a spark to [Japan’s] economy.” Initially, the Nomura Research Institute estimates that adapting infrastructure for their use will mobilize billions of dollars.
Based on past experiences, some analysts anticipate that households with cash savings will be motivated to put them into circulation. While it may seem like a minor issue, Fortune quotes an expert who estimates that at the end of last year, Japanese households had billions of yen in cash stored in their homes. This time around, inflation could prompt them to put the money sitting at home to other uses, such as investment, spending, or deposits.
A country that heavily relies on cash... Any country’s issuance of new bills is always newsworthy, but it’s especially so in Japan’s case. The BOJ acknowledges that “despite the trend toward cashless payments,” many people still prefer using cash for their transactions. In 2023, cashless payments made up 39.3% of all transactions in the country, up from 32.5% in 2021. However, this is still much lower compared to neighboring countries like China and South Korea, where cashless payments accounted for 83.8% and around 95.3%, respectively, three years ago.
… and vending machines. Japan not only has a penchant for cash but also has many vending machines. According to the Japan Vending Systems Manufacturers Association, by early 2023, more than four million vending machines were spread out across the country. This is a significant number considering the country’s size and population.
In Japan, you can find soft drink machines at train stations, konbini (Japanese convenience stores), and even on Mount Fuji. They’re also used in popular ramen shops for ordering, which helps to streamline business operations and reduce the need for waiters and staff in a country facing a serious demographic crisis.
Although the exact numbers vary, all reports point to a similar reality to that indicated by Japan’s manufacturers’ association. Reuters reports 2.2 million beverage vending machines, Nikkei Compass puts the total at 4.1 million, and the Financial Times speaks of 3.9 million cash-operated vending and ticket machines.
A change and a challenge. The holographic bills launched by the BoJ will pose a real challenge for many of these machines. In order to recognize them, managers will have to update the machines, just as they did when the bank issued new bills in 2004. Otherwise, there’ll be money in circulation that the machines can’t accept, leading to obvious complications. This challenge is significant both regarding the number of devices involved and the preparations required to prepare them for the new cash.
Even though certain Japanese municipalities have offered assistance to update vending machines, The New York Times specifies that the financial burden will primarily fall on the business owners. It won’t be cheap.
The outlet points out that a new machine can cost around $13,000, but some have already invested nearly $20,000 in adding a machine capable of accepting cashless payments. The fact that adaptation is neither simple nor cheap was evident from the arrival of new bills in 2004, which required investments of hundreds of millions of dollars for issuing and adapting machines. As of 2023, only 30% of beverage vending machines accepted the currencies introduced in 2021.
How many vending machines need adapting? While the number of machines needing an update varies, a significant number will undoubtedly require technical servicing or replacement. According to Reuters, nearly 90% of ATMs, cash vending machines, and cash registers are capable of handling the new banknotes. However, only about half of ticket vending machines in restaurants and parking lots are ready for the change.
The situation is much worse among beverage machines. In that case, the news agency says that almost 80% of the 2.2 million across the country need upgrades. “It might take until year-end to respond to this,” an executive at ticket machine company Elcom told Reuters. “That’s too slow, but we are short of components.”
Meanwhile, Nikkei Asia cites a government survey that expected the changeover to generate hardly any disruption to ATMs and cash registers. In the case of vending machines, authorities expected that 20-30% of those beverage vending machines would be compatible. In restaurants, it was estimated that 50% would be compatible.
Image | Catrina Farrell (Unsplash) | Spenser Sembrat (Unsplash)
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