The legislation establishing Densai-net illustrates its two main objectives: improving Japan's business infrastructure; and, facilitating financing for SMEs. It is hoped that Densai-net will allow SMEs to raise capital in a more efficient manner and that this, in turn, will encourage economic growth. The applicable laws and regulations were designed to allow for universal electronic account settlement services, to replace traditional note settlement methods, which entail the endorsement requirements for the transfer of notes and discounting. In addition, the applicable laws and regulations were designed for global electronic settlement services to provide lenders with a prompt and reliable method to collect claims. Further, it is anticipated that the introduction of Densai-net will encourage the factoring of accounts receivables and further increase the amount of capital in the market for lending purposes.
Densai-net has been touted as offering a number of clear advantages over the traditional claim settlement system. First, Densai-net was designed to be easily accessible; users are able to access accounts at every financial institution operating in Japan. The actual settlement of claims, meanwhile, is simplified as it limits the amount of information that must be recorded. In any event, all matters are recorded electronically and automatically. Second, users of Densai-net, unlike the process of issuing formal notes, are not required to pay a documentary stamp tax to settle their claims. Third, the Densai-net system offers certainty that a settlement will be successfully concluded because Densai-net cooperates with the so-called Zengin fund transfer system. This connects the financial institutions to facilitate fund clearances, so that both collections procedure and transfers can be completed at once. Finally, the Densai-net system can be accessed not just by, or at, the relevant financial institutions, but also via the online portals of the financial institutions.
Densai-net is expected to not only replace the traditional note settlement process, but also encourage the capitalisation of receivables and flow of funds. In the 2010 fiscal year, Japan saw the capitalisation of accounts receivables in the region of ¥180 trillion ($1.92 trillion) according to a statistical survey of business corporations. It is expected that the introduction of Densai-net will increase this amount, which should contribute to and open up new sources of capital for SMEs. It is only natural to believe that the Densai-net system may have some technical and legal issues that will arise upon its inception. But, ultimately, it is hoped that its establishment will contribute to the expansion of the Japanese accounts receivable secondary market and encourage economic growth.
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