Key Facts for Japan
- Primary real-time rails: Zengin System, BOJ-NET.
- Typical settlement times: Minutes.
- Common limits: Varies by institution.
What “real-time payments” means in Japan
In Japan, real-time payments are electronic credit transfers processed near-instantly through the Zengin System, which forwards fund transfer data between banks in real time. The system connects nearly all of the nation’s private banks and financial institutions for domestic transfers. Despite this broad access, adoption is low; real-time transactions represented just 3.7% of total payments in 2023 as cash remains dominant. While no formal statute legally defines the term, the regulatory framework governs its function, ensuring immediate and irrevocable fund transfers (industry norm).
The system is operated by the Japanese Banks' Payment Clearing Network, or Zengin-net. Regulatory oversight is provided by the Financial Services Agency (FSA), while the Bank of Japan handles final settlement. Zengin-net acts as the central clearing network for these payments, with no subsidiary clearing houses involved. To align with international practices, Japan’s financial industry is migrating its payment systems to the ISO 20022 messaging standard, which supports richer data and greater interoperability for all participants.
Though it launched the world’s oldest real-time system in 1973, Japan’s modernization and adoption rates have historically trailed global front-runners.
Payment Rail Overview
Zengin System
Launched in 1973, the Zengin System is Japan's primary network for domestic retail payments and the world's oldest real-time payment system. It connects nearly all of the country's financial institutions, relaying fund transfer data instantly between them. Since 2018, the system has operated 24/7, with final settlement between banks occurring daily through accounts at the Bank of Japan.
- Broad participation: The network covers almost all private banks and various financial institutions across Japan.
- 24/7 operation: Since 2018, the system has supported around-the-clock payments, moving beyond traditional banking hours.
- Rich data support: Through the Zengin EDI (Electronic Data Interchange) system, businesses can attach commercial details like invoice numbers to payments for easier reconciliation.
- Centralized clearing: The Zengin Center processes transactions and calculates net settlement positions for all participants, which are then finalized by the Bank of Japan.
Pros
- Real-time settlement is available at any time, day or night.
- Supports rich data attachments, improving B2B payment processing.
- Has a long history of operational experience as the world's first real-time payment system.
Cons
- Despite its age, it is considered less developed than many modern systems.
- Adoption remains low, accounting for a small fraction of total payment volumes.
- The architecture for 24/7 service may introduce complexity by running a separate system for off-hours operations.
BOJ-NET
Established in 1988, the Bank of Japan Financial Network System (BOJ-NET) is the country's real-time gross settlement (RTGS) system for large-value payments. It functions as the core infrastructure for interbank transactions, settling payments individually and immediately in central bank accounts. This process removes counterparty risk and ensures finality for high-stakes financial transfers.
- RTGS settlement: As a real-time gross settlement system, it processes and finalizes large-value transfers one by one, eliminating settlement risk between financial institutions.
- High-value focus: The system is built to handle high-value and systemically important payments, processing trillions of yen daily.
- Securities settlement: In addition to payments, BOJ-NET provides settlement services for Japanese Government Bonds (JGBs).
- Extended operating hours: To better connect with global markets, its hours were extended to 9 p.m. Japan Standard Time on weekdays.
Pros
- Offers the highest level of security and finality by settling directly in central bank money.
- Its RTGS model completely removes interbank credit risk.
- A modernized IT platform supports future upgrades and global interoperability standards.
Cons
- Operations are limited to weekdays and are not available 24/7/365.
- Designed for large-value interbank transfers, not for retail or consumer payments.
- The extended hours can create liquidity management and staffing burdens for participating banks.
Limits, Fees, and SLAs
- Licensed providers can transfer up to 50 million JPY per transaction via Zengin-net; daily caps and corporate tiers are not publicly defined.
- For cross-border payments, traditional banks may charge 3-10%, while newer providers can offer fees under 3%.
- The Zengin System has supported 24/7 operations since 2018, moving beyond standard banking hours for domestic payments.
Compliance and Risk
KYC/KYB & AML
Japan's Financial Services Agency (FSA) enforces strict anti-money laundering rules, including customer due diligence and transaction monitoring. The framework aligns with global standards, mandating the travel rule for sharing sender and recipient information to combat illicit financing and protect market integrity.
Data Residency & Privacy
While specific data residency mandates are not detailed, Japanese financial firms must adhere to strict data protection rules. The Foreign Exchange and Foreign Trade Act requires reporting on large cross-border transactions, reinforcing the legal obligation to safeguard personal information and maintain transparency.
Fraud Controls
Regulatory guidelines focus on proactive risk management through continuous transaction monitoring and suspicious activity reporting. The Payment Services Act also mandates the segregation of customer funds from company assets to protect against theft and misappropriation, a direct lesson from past exchange failures.
Recordkeeping & Audits
Financial service providers must maintain robust internal controls and transparent reporting, including detailed transaction histories. These records create a clear audit trail, demonstrating compliance with asset segregation rules and supporting tax reporting obligations enforced by the National Tax Agency.
Lightning Network Integration as a Solution
The Lightning Network is a second-layer protocol built on Bitcoin that processes transactions off-chain for near-instant, low-cost payments. While local RTP rails offer real-time domestic transfers, they are often confined by national borders. The Lightning Network complements these systems by providing a global, interoperable layer for cross-border payments, extending the reach of real-time settlement to an international scale for micropayments and remittances.
Compared to domestic rails, the Lightning Network offers faster settlement, often in sub-seconds. Its transaction fees are typically fractions of a cent, making small payments practical. While local systems have deep national penetration, the Lightning Network operates as a borderless payment web, offering truly global accessibility for anyone with an internet connection—a key distinction from country-specific payment infrastructures.
- Cross-border complexity: It bypasses the high fees and settlement delays of traditional international transfers by offering a direct, global payment route.
- Cost barriers for small payments: With minimal fees, it makes micropayments for services like content streaming or gaming economically practical, which is often not the case on other networks.
- Closed financial systems: As an open network, it provides access to anyone, moving beyond the bank-centric model of traditional payment infrastructures.
For businesses seeking a modern, global, and efficient payment layer, the Lightning Network presents a compelling path forward.
B2B Enterprise Use Cases
- Supplier Payments – A business sends instant, final payments to its global suppliers for goods or services received.
Business value: Reduces cross-border transaction fees and settlement times, improving supply chain liquidity. - Merchant Settlement – A payment processor aggregates customer transactions and settles funds instantly to merchants' accounts.
Business value: Gives merchants immediate access to earnings, eliminating traditional multi-day holds. - Treasury Optimization – A corporate treasury moves funds between international subsidiaries in real-time to manage working capital.
Business value: Offers 24/7 global liquidity management with minimal transfer costs and immediate finality. - Global Payroll – A company pays its international remote workforce or gig workers instantly, bypassing correspondent banking delays.
Business value: Delivers faster, cheaper payroll to a global workforce, improving worker satisfaction. - Royalty & Content Micropayments – A digital platform automatically streams tiny payments to creators as their content is consumed.
Business value: Creates new revenue models for digital content through granular, real-time compensation.
Cross-Border Transactions and Remittances to Japan
Cross-border real-time payments face significant hurdles, especially into markets like Japan. Historically, transactions relied on correspondent banks, creating slow and expensive FX paths; sending $200 from Japan costs an average of 6.94% in fees. Modern approaches focus on “rail bridging”—directly connecting global payment infrastructures to domestic networks. This model bypasses intermediaries, but regulatory and technical integration remains a complex challenge, limiting access and keeping costs high for many.
- United States: Driven by foreign direct investment and record exports, this corridor sees substantial B2B payments and capital flows. Remittances are also common for corporate transfers and payroll for workers in the tech and finance sectors.
- Hong Kong: A key financial link is fortified by a cross-border settlement system between the central banks of Japan and Hong Kong. This facilitates faster securities settlement and interbank transfers, making it a vital corridor for regional finance.
- European Union: Growing digital trade and data-sharing agreements fuel transactions in this corridor. Payments support a mix of e-commerce, software-as-a-service subscriptions, and business operations for multinational corporations active in both markets.
The Lightning Network offers a direct path for global payments, using Bitcoin as a neutral settlement asset. This architecture bypasses correspondent banking networks, allowing for instant, low-cost transfers that settle in seconds, not days, fundamentally changing the economics of cross-border commerce.
How Lightspark Makes Integration Easy
Lightspark helps fintechs, digital banks, wallets, and exchanges integrate the Lightning Network with minimal friction. We manage the operational complexities of node liquidity and payment routing, so you can focus on your core product and user experience. Our platform provides enterprise-grade developer tooling and a compliance-ready framework, abstracting away the backend challenges of building on Bitcoin. This allows you to offer your customers global, sub-second settlement for cross-border payments and new micropayment models. If you are looking to build the next generation of global payment services, we can help you get to market faster. Talk to our team.
Sources and Further Reading
- https://www.aciworldwide.com/real-time/japan – Japan's real-time payments adoption.
- https://www.lightspark.com/contact – Contact the Lightspark sales team.
- https://www.lightspark.com/knowledge/is-crypto-legal-in-japan – Japan's crypto legal framework.
- https://www.lightspark.com/knowledge/what-does-the-lightning-network-do – Explains the Lightning Network's function.
- https://www.lightspark.com/news/insights/what-are-lightning-payments – Overview of Lightning Network payments.
- https://www.nium.com/blog/how-japan-is-opening-payments-for-cross-border-business – Japan's cross-border payment landscape.
- https://www.reuters.com/business/finance/wise-becomes-first-foreign-firm-gain-direct-access-japans-payment-clearing-2024-10-17/ – High cost of Japan remittances.
- https://www.swift.com/swift-resource/33606/download – Japan's ISO 20022 migration.
- https://www.zengin-net.jp/en/zengin_net/zengin_system/ – Official Zengin System payment network.
