Modernization of Payment Systems Law in Japan

Abstract

In 2016, the Japanese law on payment system was reformed through amendments to the Law on Payment Services as well as to the Installment Sales Act. Consequently, the legal framework with regard to virtual currencies, inter-bank settlement systems, and credit card transactions was changed to reflect developments in business practice. The author first explains the context of the reforms, namely the payment methods used in Japan: Among the general population, cash is most common, followed by credit cards, while debit cards are hardly used. In contrast, Japanese businesses traditionally use promissory notes or bills of exchange, as well as remittances through bank networks and, more recently, electronically recorded claims.

Background to the reform in respect of virtual currency is the insolvency of the Mt. Gox Bitcoin exchange in 2014, which raised concerns regarding the state of non-regulation and potential abuse of virtual currencies. This led to the Law on Payment Services to be amended, introducing the term “valuable records” to refer to virtual currencies and regulations for exchange services of the same. Revisions of the Installment Sales Act came about through a five-year review of the Act. To increase consumer protection on the one hand and to further developments of a cashless society before the 2020 Tōkyō Olympic Games on the other, supervision of credit card intermediaries (payment service providers and those known as acquirers) was tightened. As for the inter-bank remittance systems, the Japanese government’s “Japan Revival Vision” gave the impetus for modernizing the system. This includes the introduction of an alternative to the existing “Zengin System” (Japan Bankers’ Association’s inter-bank clearing system) to allow 24/7 inter-bank remittance services.

(The Editors)