It seems that the use of promissory notes is far more common in Japan than in other countries. Quite often a large company will only outsource work to a smaller company if they agree to the payment conditions set by the larger company that often include being paid by a promissory note if the monthly invoice total exceeds a certain amount. These amounts can be as low as 100,000 yen (approx. US$ 1,000), and the amount of time it can take before the promissory note can be cashed can be up to 150 days.
So, in Japan, where it is common to bill for work at the end of the month and receive “payment” at the end of the next month, if the payment is a 150-day (5-month) promissory note, you could find yourself delivering something on the 1st of January, billing for it on the 31st of January, receiving a promissory note at the end of February, and only getting your hands on the cash at the end of July. That’s seven full months after delivery!
While it is possible to use the promissory notes as collateral for short-term loans, it effectively means you are paying interest for the five months, and taking the risk of having to pay the money back to the bank should your client not have sufficient funds in the designated account when the promissory note is due.
This means that small businesses in Japan are being used as de facto financial institutions by their clients.
Fair? Maybe not. Common? Yes, in Japan.