As of the end of May 2025, new banknotes account for only 28.8% of the approximately 16 billion bills circulating in Japan. According to Nikkei reporting, this represents roughly 5 billion notes—far below initial adoption projections. Behind this figure lies a complex interplay of factors: the advancement of cashless payments, an increase in "mattress savings" (tansu yokin), and delayed equipment upgrades in vending machines and retail locations. For retail shop owners and bank tellers who handle cash daily, this "transition period" of mixed old and new banknotes presents a dual challenge of declining operational efficiency and heightened counterfeiting risks.
Why the Delay? Understanding the Slow Adoption of the "Shibusawa Eiichi" Notes
The new banknotes issued on July 3, 2024, feature the world's first 3D hologram technology, with portraits that appear to rotate—a highly sophisticated anti-counterfeiting measure. According to the Japanese Government's official announcement, the 10,000-yen note features Shibusawa Eiichi, the "father of Japanese capitalism"; the 5,000-yen note features Tsuda Umeko, a pioneer in women's education; and the 1,000-yen note features Kitasato Shibasaburo, a founder of modern medicine. These new notes also feature improved tactile recognition compared to previous versions, incorporating universal design elements for the visually impaired.
However, these advanced technologies have paradoxically become a bottleneck for adoption. Financial institution ATMs and transit ticket machines began upgrades before issuance and have now achieved nearly 100% compatibility. The problem lies with the approximately 2.2 million vending machines nationwide and the bill validators and counters installed in small and medium-sized retail stores. According to Nikkei reporting, the Japan Vending System Manufacturers Association notes that vending machine compatibility remains incomplete, with older machines in rural areas still only accepting old banknotes.
Even more serious is the issue of "mattress savings." In Japan's prolonged low-interest-rate environment, household cash holdings kept at home are estimated at approximately 100 trillion yen. These old notes remain stored without entering circulation, impeding the natural transition to new banknotes. During the previous 2004 banknote refresh, strong demand for counterfeit prevention drove high adoption rates and relatively smooth transition. This time, however, with Japan's counterfeit detection rates at historic lows, ordinary consumers have little motivation to exchange their bills.
Business Risks from Mixed Currency—Hidden Costs You Cannot Ignore
In the retail industry, the coexistence of old and new banknotes has become a serious management challenge beyond mere inconvenience. First is the complexity of end-of-day cash reconciliation. Cash management operations that previously dealt with only one banknote design must now identify and count up to six varieties (three denominations each in old and new versions). This increased workload translates directly into higher costs, particularly for small and medium retailers already struggling with labor shortages, in the form of increased overtime after closing.
The second challenge is the complexity of counterfeit risk. In January 2025, according to Asahi Shimbun reporting, the National Police Agency announced the discovery of 630 counterfeit "Emperor Showa 60th Anniversary 100,000-yen commemorative silver coins" nationwide, arresting four suspects. While this case targeted commemorative coins, in the current environment of mixed old and new banknotes, the difficulty for store staff in identifying counterfeits has increased dramatically. Counterfeiting techniques for old notes have been refined over many years, making visual detection increasingly difficult. Meanwhile, while the new notes' 3D holograms certainly make counterfeiting harder, authenticating them requires specialized equipment or adequate training.
The banking industry is also experiencing notable declines in counter service efficiency. While exchange demand for new banknotes exists mainly among elderly customers, old banknote deposits continue to occur. Some ATM models do not support old banknote deposits, causing business to concentrate at teller windows. One regional bank branch manager states: "Right after the new banknotes were issued, lines formed for exchanges. But a year later, the effort required for banknote management hasn't decreased. If anything, vault management has become more complex because we need to keep both old and new notes on hand."
The greatest risk during this transition period is losses from human error. The possibility that less-experienced staff might overlook counterfeit bills or make counting errors with mixed old and new notes during busy hours is far from negligible. If a counterfeit is accepted, reporting it to the police will not result in an exchange for genuine currency—the store bears the entire loss.
Technology Solutions—Business Innovation Through Next-Generation Cash Handling Equipment
Addressing the challenges of the mixed-currency transition period has limits when relying solely on strengthened human response. This is where cash handling equipment equipped with the latest CIS (Contact Image Sensor) technology plays a crucial role. CIS sensors scan banknote surfaces at high resolution, instantly analyzing printing patterns, watermarks, and the optical properties of holograms. This enables authentication and denomination identification for either old or new banknotes in less than 0.1 seconds.
Particularly noteworthy is the multi-currency, multi-denomination mixed counting function. In Japan's increasingly globalized retail environment, opportunities to receive foreign currency from inbound tourists are growing. According to MORICASH, the latest bill counters can automatically identify major currencies including US dollars, euros, and Chinese yuan in addition to all six denominations of old and new Japanese yen, calculating accurate totals in a single counting operation. This dramatically reduces the time previously required to sort and count each denomination separately.
Serial number tracking functionality also contributes to improved cash management transparency. In high-value banknote transactions, counters automatically record and store serial numbers, ensuring traceability in case of counterfeit infiltration or internal fraud. This function is particularly effective for industries handling large volumes of cash, such as bank teller operations and pachinko parlors.
Furthermore, future-proofing through firmware updates is an important selection criterion. The Bank of Japan may continue to refresh banknotes in response to advances in anti-counterfeiting technology. Selecting equipment that can adapt through software updates without hardware replacement leads to long-term cost optimization.
Four Actions to Take Immediately
- Verify current equipment compatibility: Contact manufacturers to confirm whether bill counters and validators installed in your stores or branches support the new banknotes issued in 2024. If not supported, consider firmware updates or equipment upgrades.
- Retrain staff: Conduct training for all staff on how to verify the 3D holograms and watermarks of new banknotes. In particular, establish a two-stage verification system combining visual confirmation points with machine verification.
- Review cash reconciliation processes: Consider introducing mixed-counting compatible equipment to prevent counting errors from mixed old and new banknotes. If already deployed, verify that these functions are being fully utilized.
- Establish counterfeit discovery protocols: Document reporting flows, evidence preservation methods, and police notification procedures for when counterfeits are discovered, and communicate these to all staff.
Strategic Response to the Changing Cash Environment
One year has passed since the issuance of new banknotes, and Japan's cash circulation environment is entering a major turning point. While cashless payments are becoming more widespread, cash remains an indispensable means of payment in Japanese commerce. According to GlobalData forecasts, the Japanese card payment market is expected to reach 134.9 trillion yen by 2025; conversely, this implies that an even larger scale of cash transactions still exists.
The coexistence of old and new banknotes will continue for at least several years. To balance operational efficiency and security during this period, an optimal combination of human and technological responses is required. In particular, the latest cash processing equipment equipped with CIS technology plays a role not just as a tool for efficiency, but as a defense line protecting businesses from counterfeiting risks.
Considering the possibility of the Bank of Japan introducing further anti-counterfeiting technologies or the intensification of digital yen pilot experiments, strategic investment in cash processing infrastructure is also a preparation for future changes. For all businesses handling cash, now is the time to review their cash management systems and formulate capital investment plans with an eye on the next decade.
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