Many Japanese financial institutions will stop issuing paper promissory notes and cheques on September 30, ahead of the complete abolition of the instruments in March next year, Jiji Press reported on September 7.

The move clears the way for a full shift to internet banking and electronic settlement among Japanese companies, ending a paper-based payment culture that has underpinned business-to-business trade in the country for decades and long been cited as a drag on productivity at smaller firms.

From October 1, payments drawn on checking accounts using paper promissory notes and cheques will in principle no longer be possible.

The Japanese Bankers Association and other bodies are calling on users, chiefly small and midsize businesses, to move to electronic payment services. Among the options is a system for electronically recorded monetary claims run by a subsidiary of the association.

Promissory notes and cheques have served as a settlement tool between companies, but carry the risk of loss or theft, and funds take time to be credited to recipients. Digitising the procedures is expected to cut the workload and costs tied to processing payments.