Treasury Funds Services

The Bank accepts deposits (treasury funds) from the government as government deposits. The Bank provides the following services: (1) Receipt, disbursement, and accounting of treasury funds; (2) Management of deposits of the government; and (3) Custody of securities acquired by or submitted to the government. Treasury funds consist of revenues from the public, such as national taxes and social security premiums, and government expenditures, for example, payments such as public works expenditures and public pensions. Receipt and disbursement of treasury funds are recorded accurately by the Bank, classified by not only the specific government account but also the individual government agency. These figures are checked each month to ascertain whether they match those calculated by the relevant government agencies. The Bank acts as the custodian of securities acquired by or submitted (as collateral or deposits) to the government. The Bank receives, delivers, and keeps in custody such securities on behalf of the government. For the convenience of the public and government agencies across the country, the Bank designates with the approval of the Minister of Finance, many branches and offices of financial institutions throughout the country as agents and entrusts them with the receipt and disbursement of treasury funds. With this scheme, most receipts and disbursements of treasury funds are conducted by these agents. The Bank has been making advances toward achieving more streamlined online processing for treasury funds operations for the convenience of the public and to enhance efficiency in the operations of related institutions.

Electronic Operations Regarding Treasury Funds

Date Nov. 2, 2001 Mar. 29, 2000 Title A New Scheme for Electronic Payment of Government Taxes and Fees Toward More Digitized Treasury Funds Operations

A New Scheme for Electronic Payment of Government Taxes and Fees

November 2, 2001 Bank of Japan The Bank of Japan1 hereby introduces a scheme for electronic payment of taxes and fees to the government which it plans to make available by the end of March 2004. The Bank has two objectives: to enhance payers' convenience and to streamline the operations at banks, in government offices, and in the Bank itself. The Bank examined various electronic methods for the new scheme in cooperation with related institutions, and has selected the "Multi-Payment Network" system which is now being developed by the banking industry in Japan. The network is designed to enable bank customers to pay electronically every kind of bills including utility, telephone, and credit card charges as well as local government taxes. The pilot stage of the network started last month.
1

Under the Bank of Japan Law and the Public Accounting Law, the Bank of Japan

handles the government's funds. 1. Merits for Payers Tax/fee payers will be able to make electronic payments to the government without going to a bank by logging into electronic banking services via PCs, mobile phones, and other means. They will be able to pay from virtually anywhere and at any time of the day or night, and even on bank holidays when the banks are closed.

Banks' Automated Teller Machines (ATMs) will be another means for the electronic payment scheme. Using the 24-hour ATMs which are now becoming more widely available, non-PC users too will be able to pay even in the middle of the night.2 An example of electronic payment would be as follows (see Appendix):3 (a) An individual who requires an online government service4 first accesses the Web site of the ministries and agencies. (b) He or she obtains two unique numbers, i.e., the Identification Number and the Confirmation Number5 from the Web site. (c) To pay for such services, the payer sends these two numbers from his/her Internet banking terminal to his/her bank. (d) (e) The bank transfers them to the government through the "Multi-Payment Network."6 The government sends billing information back to the bank through the "Multi-Payment Network." (f) (g) (h) (i) The bank transfers the information to the payer's terminal. The payer then sends a payment instruction with a single "click" on the screen. Upon receiving this instruction, the bank debits the payer's account. The bank then credits its collection account and sends a collection record to the government as well as to the Bank of Japan. (j)
2

The bank sends a notice of payment to the payer's terminal.

To participate in the scheme and to offer new electronic banking services to their customers,

banks need to upgrade their systems.

The message exchanges in (c)-(j) are processed within a few seconds. The payer uses his/her

keyboard only in (a), (c), and (g).

4

Under the "e-Japan Strategy," published by the Japanese government in January 2001, online

government services will be widely available by the end of the fiscal year 2003.
5

This dual numbering reduces the risk of intentional reading of others' billing information. This

also eliminates the possibilities of unintentional payment of others' bill as a result of mistyping.
6

The participating banks' networks and the "Multi-Payment Network" enable online, real-time,

and interactive message exchanges between payers and payee institutions.

2. Electronic Processing at the Bank of Japan's Agent Banks Receiving the payment and reporting to both the government and the Bank are the business of the agent banks entrusted to them by the Bank. Hitherto, they have been paper-based and the Bank intends to shift them from paper to electronic processing. In the plan, in (i) above the banks operate as agent banks of the Bank of Japan.

3. The "Multi-Payment Network" (1) Rationales for the "Multi-Payment Network" (a) Cost minimization As noted above, the "Multi-Payment Network" is being designed for various bill payments, and using the same network with the standardized procedures for the collection of government taxes and fees would produce a cost sharing benefit. In other words, the Bank's share of the cost of building and maintaining the network would be much less than that of a single-payment network built and used only by the Bank. This cost saving would be to the taxpayer's benefit.

(b) Security Special consideration has been given to the security of the "Multi-Payment Network" to prevent, detect, and reduce potential risks. An external specialized institution has assessed the network's security management framework as adequate at this stage. (c) Reliability of the network management Japan Multi-Payment Network Management Organization (JAMMO) runs the network. It is a banking industry-wide organization, many of whose members are agent banks of the Bank of Japan, and thus the Bank has confidence in JAMMO's network management. (2) Requirements to be met The Bank of Japan considers the following are requirements for using the "Multi-Payment Network." (a) The existing services of the "Multi-Payment Network" such as telephone bill payment are operated safely and smoothly. (b) Appropriate contracts are prepared by the institutions involved, and necessary legislation has been established. (c) The cost is fairly allocated among the related institutions.

Tentative Scheme for Electronic Tax/Fee Payment to the Government1

Toward More Digitized Treasury Funds Operations

March 29, 2000 Bank of Japan 1. In Japan, the Bank of Japan and private financial institutions as its agents handle most treasury funds operations for the government, such as receipt of national taxes and payment of social security benefits. The Bank believes that thanks to the revolutionary progress in information technology (IT) in the last few years, introduction of advanced IT into these operations would yield substantial benefits, and has therefore recently started discussions on digitization of such operations with various ministries and governmental agencies as well as private financial institutions. 2. The Bank expects that more digitized treasury funds operations will make payment and receipt of money between the public and the government more convenient. For example, individuals and businesses will be able to use their personal computers or other information terminals to pay national taxes and social security premiums to the government. In the United States, the Electronic Federal Tax Payment System (EFTPS) started in 1996. This system offers businesses the convenience of making all their federal tax payments electronically 24 hours a day, 7 days a week, instead of using paper documents. Some individuals may benefit from quicker disbursement of money from the government. 3. More digitized treasury funds operations will also bring higher efficiency to the services of the government, private financial institutions and the Bank itself, which, in turn, will create such benefits as a reduction in costs which are ultimately borne by the public. 4. In December 1999, the government published an action plan for movement toward a "Digital Government" in its "Millennium Project." The Bank's initiative to more digitize treasury funds operations is in line with this action plan. Since treasury funds operations involve a large number of governmental bodies and financial institutions, this initiative itself may contribute to the expansion of the IT-related markets.

5. The Bank believes that the digitized treasury funds operations will have two key features; they will be paperless and network-based. Paper documents will be replaced by electronic messages. Paper money, coins and checks as a method of payment will be replaced by electronic debit instructions to account-holding financial institutions. Computer networks linking various governmental bodies, private financial institutions, and the Bank will carry such messages and instructions, which will eventually lead to straight-through processing (STP). 6. A security- and cost-conscious approach is indispensable in achieving more digitized treasury funds operations. The institutions connected by networks must collaborate to maintain the high security level in the network for treasury funds operations in order to ensure public confidence in the network. To save costs, it is preferable to use multipurpose and extensible networks, standard protocols and common data formats. Multiple networks may be used for diversified operations. Modification of some operations processes may prove desirable. 7. As it is not feasible to introduce advance IT in all kinds of treasury funds operations at once, the Bank will take a step-by-step approach, envisaging consistent and efficient linkage between several operations in the near future. In this context, the Bank recognizes that discussions with governmental bodies and private financial institutions are vitally important. The Bank will of course also welcome opinions from the public on this matter.