Outline of Banknotes and Coins
The Bank is the sole issuer of banknotes (Bank of Japan notes) in Japan. It issues banknotes and conducts operations to ensure the stability of banknote supply and to maintain public confidence in banknotes.
Specifically, the Bank receives/pays banknotes from/to financial institutions. It counts the banknotes it receives from them, examines them to verify their authenticity, and checks their fitness for recirculation.
Coins are delivered to the Bank by the government and are put into circulation.
Issuance of Banknotes
The Law stipulates that the Bank issues banknotes.
Banknotes are manufactured by the National Printing Bureau, which is an incorporated administrative agency, and are delivered to the Bank in exchange for the manufacturing cost. Banknotes are issued and put into circulation when financial institutions that hold current accounts at the Bank (BOJ account holders) withdraw them from their current accounts at the Bank.
Banknotes are a widely used payment instrument, especially for small-sized payments. The Law stipulates that banknotes shall be used for payment as legal tender, in other words, they are a legally defined payment instrument that should not be refused by any creditor in satisfaction of any debt.
The Bank issues banknotes in four denominations: 10,000 yen, 5,000 yen, 2,000 yen, and 1,000 yen.
Circulation of Banknotes
Individuals and firms obtain banknotes issued by the Bank by withdrawing money from their deposit accounts at financial institutions. Banknotes are used for the purchase of goods and services, financial transactions, tax payments, and other purposes. A portion of the banknotes is brought back to financial institutions and held as deposits.
Financial institutions bring their excess banknotes to the Head Office or branches of the Bank and have their BOJ accounts credited. When banknotes return to the Bank, they are withdrawn from circulation.
The Bank and financial institutions serve as bases for banknote circulation, to ensure that banknotes circulate throughout the country.
Maintenance of Banknotes
The Bank carries out various operations concerning banknotes to ensure that public confidence in banknotes is maintained.
When banknotes return to the Head Office or branches of the Bank, the Bank counts them and verifies their authenticity rigorously to prevent counterfeit or altered banknotes from being returned to circulation. It also separates returned banknotes into those suitable for recirculation and those too damaged or worn for further circulation. Banknotes that are judged to be unfit for recirculation are destroyed. This process is called the examination of banknotes. Those in good condition are used for further circulation.
The Bank exchanges damaged or worn banknotes for new ones at the Head Office or branches of the Bank.
In order to prevent counterfeiting and altering, banknotes are incorporated with many security features. Given the surge in recent years in the number of counterfeit banknotes detected, on November 1, 2004, the Bank began issuing the new series of Bank of Japan notes (10,000, 5,000, and 1,000 yen notes) with state-of-the-art security features. To address counterfeiting on a global basis, the Bank actively exchanges information and conducts joint studies with foreign central banks.
Coins are issued by the government. Coins are minted by the Japan Mint, which is an incorporated administrative agency, and are deemed to be issued when they are delivered to the Bank.
Coins, the same as banknotes, are put into circulation when BOJ account holders withdraw them from their accounts at the Bank.