Business Insights

By Kasia @ Ikigai Connections

[October 8, 2020 update] Something big happened soon after first publishing this blog post: the Japanese government ordered government offices to stop

requesting hanko signatures (
Nikkei Asia, 
Japan Times)! It still remains to be seen how all government offices will handle this, and whether corporations and smaller businesses will all be able to jump on board, but I personally am intrigued with the
new Prime Minister Suga’s priority of digitizing the government. Based on past examples, when something is decided in Japan, it really gets done – and well! Also, be sure to check out this article from 
Tokyoesque (with interesting TV commercials) showcasing new digital signing services available in Japan. 

Why are Japanese companies so hesitant to switch from the nearly 2,000-year-old habit of using hanko to digital signatures?

The current COVID-19 pandemic is highlighting this exact issue as it deals with WFH (Work From Home). There are 3 reasons for this hesitation: technological limitations, the culture behind being available
in person at the office, and an industry that does not want to be bankrupted. 

WFH Is Highlighting Some Of Japan’s Inefficiencies 

Companies all over the world are struggling with WFH, but Japan in particular is facing many issues. Although I am a lifelong Japanophile, even I have to admit that the land of technologies, with its to-the-minute shinkansen (bullet
trains) and the world’s fastest supercomputer, 
Fugaku, has many inefficiencies when it comes to the corporate and working environment. 

The Hanko

The intriguing history of hanko in Japan and other East Asian countries is described on 
Wikipedia, but basically, hanko (or inkan) are small stamps or name seals that serve as a signature. 

When I lived, studied and worked in Japan for 8 years between the 1995-2006 time frame, I often wondered at the importance of the hanko. I needed it to open a bank account, get a cell phone, and sign various documents
at school/work, so purchasing a hanko was one of the first things I did upon arrival in Japan. I actually found it to be a neat conversation starter because I used Japanese kanji characters to
write my first name.

What Is The Big Deal With Hanko?

Out of all of the WFH problems during this pandemic, the hanko in particular stands out. Employees are going out of their way to visit their office to sign documents with their hanko,
when they could be administering approvals remotely. 

Let’s briefly look at the 3 reasons why Japanese companies hesitate to switch from hanko to digital signatures.

#1: Technological Limitations

The current pandemic is highlighting many inefficiencies within Japanese corporations, such as some companies still using fax machines, companies not offering laptops or mobile phones to employees, and company
privacy not allowing employees to log on outside of the office building. This lack of modern tools affects both employers and employees as they struggle with WFH. 

In addition, employees’ homes may be too small to set up business in a corner of the house without noise or distractions. 

There are numerous companies in the world that offer e-signature options, but to use such tools would require that you are more aligned with being paperless and that you are okay with your employees accessing
these files outside of your company walls. (Sources: 
Japan Culture * NYC and 
Washington Post)

(Side note: it can be said that not having a laptop nor work phone is a way to get people to not work so much outside of work hours, and therefore help their mental health, but we may need to consider a way to address both remote working and work/life balance –
a topic for another day!)

#2: The Culture Of Being In The Office

In addition to the lack of proper tools that could let you work from home, there is a work culture of needing to be in the office. Generically speaking, you stay until your supervisor leaves, and the sense of
responsibility you feel for doing your work and not burdening others is strong enough to warrant not even taking vacations.

The hanko is used to sign off on documents, technical drawings, proposals and contracts, and it places a kind of responsibility on the person who uses their hanko. Since it is your unique stamp, you have to do it in person,
something which can not be done remotely. 

Even with employees forced to work from home, many still feel the need to travel to the office in order to stamp certain files. 

#3: The Hanko Industry Is Holding On For Dear Life

There have been movements to become more digital in 1997 and 2017 (
Daily Shincho), and there are many people who want to stop using the hanko, but the hanko industry has been holding on tight. According to Koichi Washio, an economics journalist, the government allocated 1,043 billion yen in the fiscal 2020 budget for hanko revenue (approximately
9.96 billion USD). There are approximately 9,000 vendors and 10,500 stamp shops associated with the hanko industry, and many are already feeling the effects with the changes brought on by the pandemic. 

If you’ve ever visited a department store or stationary store in Japan, you may have even see the immense amount of hanko shapes, colors, materials and styles. It’s a big industry that may be blocking technological advancements in
the corporate culture of Japan.

According to this 
NY Times article about teleworking in Japan during the pandemic and the “hanko habit,” the All Japan Seal Industry Association “argued that hanko were
an important part of the country’s ‘social infrastructure,’ crucial to people who are less tech savvy, including the elderly and people in rural areas.” While that may be true, the bigger companies, at a minimum, could experiment
with digital signatures to help make them more competitive and streamlined.

Things Are Changing

The pandemic is forcing Japan to rethink hanko. In April, the government said it would review the hanko practice in order to help keep people home during the pandemic (
Japan Times). 

But there is no easy answer, and it surely won’t come easily. 

Removing the hanko habit involves rethinking paperless options for documents, digital storage, and digitizing decades of past documents. 

It means a conversation about accessing company data outside of the company buildings and having good security. 

It could even lead to greater conversations about automation and kaizen/improvements in the office, which could mean a revamping of many outdated practices (including the fax machine). 

It could mean having to educate many people on the use of digital products.

Some companies have already switched from hanko to digital signatures, such as SMBC Nikko Securities (
Nikkei Asian Review). This article also highlights Daiwa Securities Group, Nomura Securities, Resona Bank, and Sony Bank. Sumitomo Mitsui Banking Corporation and Mizuho Bank are partly there.

In Conclusion

We don’t have to throw the baby away with the bath water – at least not yet. The hanko has a historical and cultural meaning in society, and to negate it completely would do it a disservice.
At a minimum, we could first consider basic paperwork that doesn’t require negotiations or in-person meetings to experiment with a hanko-less process.

Perhaps, instead, the idea of hanko could be more aligned with the fast-paced business world that requires speedy approvals and environmentally-friendly options. Then Japanese companies could become even more competitive and efficient in this global economy.

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