Japan has just been reminded of something it hasn’t experienced in 20 years: the launch of banknotes. A week ago, the central bank began issuing a series of new 1,000, 5,000 and 10,000 yen notes, each featuring the face of a prominent figure in the country’s recent history and enhanced with “anti-counterfeiting” technology. The change may seem like a simple curiosity, but it represents a headache for many businesses now facing a complex dilemma: whether to opt for cashless payments or dig out their wallets.

The reason is simple. In a country like Japan that is crazy about physical money, there are millions of vending machines spread all over the place.

And many will not be able to work with new bills.

Japan, premiere. July 3, 2024 will be a memorable date in Japan’s numismatic history. On that day, the central bank (BoJ) released a new series of 1.6 trillion yen 1,000, 5,000 and 10,000 yen notes. They will feature portraits of Shubusawa Eiichi, Tsuda Umeko and Kitasato Shibasaburo, prominent figures in Japan’s economic, cultural and social life in the second half of the 19th century and the first decades of the 20th century, respectively.

But… Why the change? The decision is important for several reasons. First, such an operation has not been carried out in Japan for two decades. Beyond the portraits and symbolism, second, the central bank wants to make it even harder for counterfeit banknotes, whose activity has already decreased significantly: only 681 counterfeit notes were detected in 2023, a far cry from the almost 26,000 in 2004. To continue on this path, new designs that will coexist with old ones and still be legal will include extra protections.

“They have the latest security features, including 3D holograms,” the agency says. To make things easier for foreigners, they have also enlarged the Arabic numerals that indicate their face value.

“Contribution to the economy”The arrival of the new banknotes could have a further impact on the country’s economy. At an event at the Bank of Japan last week, Minister Fumio Kishida expressed his desire for them to “boost the economy” of the country. For starters, the Nomura Institute estimates that retrofitting infrastructure could mobilize billions of dollars.

Based on previous experience, there are analysts who expect families with cash savings to be encouraged to put it into circulation. It may seem like a minor problem, but Luck He quotes one expert who estimated that Japanese families had accumulated billions of yen in banknotes at home at the end of last year. Inflation could then encourage them to put the money they had at home to other uses, such as investing, spending or depositing.

A country loyal to money. The printing of new banknotes is news in every country, but probably more so in Japan. The BOJ admits that this is because “despite the trend towards cashless payments”, many people still use cash for their transactions. In 2023, cashless payments represented 39.3%, a few percentage points higher than in 2021 (32.5%), but still far from other neighboring countries such as China or South Korea. Three years ago, cashless payments already represented 83.8% in the former, while in the latter it was around 95.3%.

…And vending machines. Japan doesn’t seem to be going cash-only. Vending machines are also common in the country. Quoting the Japan Vending System Manufacturers Association, Tapas Magazine He notes that by early 2023, more than 4 million of these devices will have been distributed across the country, resulting in a significant “penetration rate” when surface area and population are taken into account.

There are soda machines in stations and stores Kombini and even Mount Fuji. It’s also used in popular ramen shops where takeout is a thing of the past, speeding up work organization and making it possible to get by without waiters and staff in a country mired in a serious demographic crisis.

The figures for the number of devices do not always match, but they all point in a similar direction to the Japanese manufacturers’ association figures. Reuters examined 2.2 million vending machines, Nikkei Compass estimated a total of 4.1 million, and Financial Times It’s talking about 3.9 million cash-operated vending and ticket machines.

A change… and a challenge. For many of these machines, the holographic banknotes that BoF is introducing will be a real challenge. In order to recognize them, those responsible will need to update them, just like the 2004 issue. Otherwise, there will be more money in circulation than they can accept, and the difficulties that this will bring will arise. This challenge is not small. Both because of the number of devices and the meaning of preparing them for the new money.

Although there are some municipalities that have offered to help renovate the vending machines, New York Times He notes that the economic effort will fall primarily on business owners. And it won’t be cheap.

The newspaper notes that a new machine can cost around $13,000, but there are those who have already invested almost $20,000 in a machine that can accept cashless payments. Proof that adaptation is not easy or cheap is that the introduction of new banknotes in 2004 required hundreds of millions of dollars from the time they were issued to the time the machines were adapted. In 2023, only 30% of beverage vending machines accepted the notes introduced in 2021.

But… how many of them do you have to adapt to? The figures fluctuate but show that there are a large number of machines that need to be serviced or are doomed to be replaced. The Reuters agency assures that if we are talking about bank counters, ticket machines and cash registers, almost 90% of them are now ready to work with the new banknotes. If there were ticket machines in restaurants and parking lots, this number would be only half as much.

The situation would be much worse for beverage machines. In this case, the agency assures that almost 80% of the 2.2 million distributed across the country need updating. “It may take until the end of the year to find a solution to the situation,” admits an executive at Elcom, a company dedicated to automation. “It’s very slow, but we are missing components.”

Nikkei Asia cited a government study that predicted the change would cause minimal disruption at ATMs and cash registers. It expected 20% to 30% of those selling drinks at vending machines to comply, while it estimated the figure would be 50% at restaurants.

Pictures | Catrina Farrell (Unsplash) and Spenser Sembrat (Unsplash)

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