1. Making and Issuing Money Are Two Separate Jobs
Under the Bank of Japan Act, the Bank of Japan is designated to issue banknotes [2]. On the other hand, coins are manufactured by the Mint Bureau and issued by the government [2]. It is important to separate the ideas of manufacturing and issuing. The third path involves deposits in bank accounts. This is money that does not become paper or coins. Deposits increase when banks lend money. Explanations of this process can be found in documents from the Bank of Japan and the Bank of England [2][2].
2. How Banknotes Are Printed and Released Through Banks
Banknotes are manufactured by the National Printing Bureau, an independent administrative agency. The Bank of Japan pays the manufacturing costs and takes delivery of the notes [2]. This step is called "manufacturing." However, the moment of "issuance" is not when the note leaves the printing press. A banknote enters the public world when a financial institution that has a transaction account with the Bank of Japan withdraws funds from that account to receive the note [2]. The act of withdrawing money from an account to receive paper is what constitutes issuance.
When banknotes are no longer in use, financial institutions bring them back to the Bank of Japan and deposit them into their current accounts. This process is called "return." The Bank of Japan counts the number of returned notes, checks for counterfeiting or alteration, and determines if they can be used again. This inspection is called "examination" [2].
3. How Coins Are Made by the Mint Bureau and Issued by the Government
The Mint Bureau manufactures coins. Once manufacturing is complete, the coins are delivered to the Bank of Japan. At that point, they are considered issued [2]. The authority to issue currency belongs to the government, while the Mint Bureau handles the manufacturing [2]. The number of coins to be manufactured is decided each fiscal year by the Ministry of Finance, based on how much currency is circulating [2]. The Ministry of Finance also publishes annual manufacturing plans for Bank of Japan notes [2].
The materials used are public. The 5-yen coin is made of brass, and the 10-yen coin is made of bronze [2]. However, the Mint Bureau does not publish the manufacturing cost per coin. The Mint Bureau says disclosure could affect public trust or help counterfeiting [2].
4. How Bank Loans Create Deposits
According to the Bank of Japan, when the amount of money (money stock) changes, it must always involve a change in assets such as loans or securities investments, or a change in liabilities other than cash and deposits [2]. An increase in deposits is accompanied by changes such as bank lending. People often think that banks simply lend out the deposits they have collected. However, the Bank of England explained in a 2014 article that most modern money is created when banks lend. It stated that banks are not just intermediaries that collect deposits and lend them out [2]. Although this explanation uses British banks as examples, it describes how banking systems work generally.
When lending, banks do not hand over existing deposits from their hands. Instead, they create a new deposit in the borrower's account. When that money is spent, it moves to another bank.
5. Next Question: How Is the Total Amount of Money Decided?
The manufacturing and issuing of banknotes and coins have clear roles. Deposits increase through bank loans. So, at what stage is the total amount of money in society decided? The Bank of England says the total is ultimately determined by central bank monetary policy [2]. How the Bank of Japan adjusts this through interest rates and other methods is not fully covered in this article.
Try lining up the coins you have on hand and look at the year they were manufactured. You might notice that coins of the same denomination look different depending on the year. Reading the Bank of Japan’s page on "Overview of Issuance and Management of Banknotes and Coins" allows you to follow the path of how money enters the world. The Bank of England’s 2014 explanation (in English) describes the mechanism of how deposits are created through loans in more detail.