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Business trends

Japanese companies graduate from 'hanko' stamps era

Whisky titan Suntory and social media app Line shift to electronic signatures

Should Japanese businesses and people continue using their corporate and personal stamps, or should the things be put in museums? (Nikkei Montage)

TOKYO -- The coronavirus pandemic of 2020 is upending a Japanese business tradition that goes back more than 100 years -- hand-stamping documents to authenticate them.

Not even the government appears to want to safeguard the tradition. On Friday it issued guidelines essentially saying carved hanko or inkan seals are not necessary when concluding contracts.

These tools, used instead of signatures, have been ingrained in Japanese corporate culture. But the practice, and internal regulations that bar employees from taking home company stamps, became an obstacle as offices emptied out in early spring and employees dodged the novel coronavirus by working from home.

Japanese beverage maker Suntory Holdings, known the world over for its fine whiskies, has decided to abandon seals and the practice of stamping paper documents in person, which hampered the company's shift to telecommuting.

The new practice will affect about 10,000 group employees by 2022. Suntory estimates a raft of annual savings -- 30 million yen ($279,000) in contract paper, stamp and mail expenses; 60,000 hours of paperwork; 3 million sheets of paper and 18 tons of CO2 emissions.

Suntory realized that hanko have become antiquated.

"We recognize that electronic stamps provide legal evidence," a company spokesperson told the Nikkei Asian Review.

Outside the IT industry, it is rare for a large Japanese corporation to move to digital signatures.

Mercari, an online flea market operator, is considered an early adopter of written and electronic signatures for official documents.

The company had already abandoned traditional seals for in-house documents, but the pandemic forced it to use virtual or written signatures for client and business partner contracts when legally permissible.

Mercari requests its clients to seal deals with digital signatures but makes hanko available for those that cannot.

Mercari moved to signatures after employees who were supposed to be sheltering at home had to make special trips to the office to use hanko. The company's employees began telecommuting in mid-February.

According to a survey conducted by Freee, a developer of cloud-based accounting software, almost 60% of people working from home go to the office more than once a week, mostly to check documents sent from clients and companies, and to stamp contracts. The survey result reflects a lack of corporate flexibility.

Yahoo Japan, a SoftBank subsidiary, put society's contract difficulties in perspective last month when it issued a news release saying, "Japan's digitization is not as advanced as in other countries." The portal, a dominant player in Japan's internet industry, has a goal of sealing 100% of its contracts with electronic signatures by next March.

Also in May, chat app operator Line abandoned hanko in favor of electronic contracts.

With the coronavirus giving Japanese companies a reason to graduate from the hanko era, online e-signature services are strengthening their footholds in the country.

Tokyo-based research company ITR predicts that the domestic market will expand to 11.7 billion yen in fiscal 2022, three times its size in 2018.

DocuSign, a U.S. e-signature service provider, intends to be a player in the Japanese market, and Japan's own Bengo4.com, whose e-signature service expects to have earned revenue of 600 million yen for the fiscal year ended this past March, projects the service will bring in 10 billion yen during the next five years.

With some IT giants abandoning the ancient hanko, Japanese society has a lead it can choose to follow.

And there are indications Japan is going in that direction. In late April, the Regulatory Reform Promotion Council began discussing the use of stamps in response to the spread of the coronavirus. It is seeking legal revisions.

On Friday, the Japanese government expressed for the first time that a seal is not necessarily required when concluding contracts among businesses or for public-private transactions. It says contracts can be authenticated without a stamp by using an email history or other means.

"Unless specified, the effect of the contract will not be affected if it lacks a seal," says a statement jointly published by the Cabinet Office, the Ministry of Justice and the Ministry of Economy as part of a Q&A regarding the current legal interpretation of whether seals are necessary.

The guidelines clarifies rules regarding civil litigation law and whether it is illegal to enforce a contract that lacks a stamp.

The guidelines appear to free businesses from having employees run back to the office to use a company seal.

One power company executive seemed to be looking forward to this day when he recently spoke to Nikkei, saying, "We cannot abandon [the seal] as long as public offices ask that we stamp documents."

In late April, Hiroaki Nakanishi, chairman of Japan's powerful business lobby known as Keidanren, was blunt. "Hanko are nonsense," he said. "They should be preserved as works of art."

Additional reporting by Natsuko Katsuki, Norio Matsumoto, Mariko Saito and Hisao Kodachi in Tokyo.

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