History of the exchange in Japan
Where is the forex coming from? Looking up the former days, it started from the word, "Kae-zeni" or "Kae-sen" in Kamakura, Muromachi era. It meant to make loans to poor farmers who were not able to pay full taxes, and the lenders were always some riches. Especially the alcohol makers played a roll of the main cast in the economy in those days.
Coming down to Edo era, they developed their business and expanded the financial service to the reimbursement. In Edo, the economy grew by increase of consumption, and many merchants needed to purchase the food and materials from Osaka which had the biggest market. As a result, Japanese exchange style, 'Kawashi' was born out. Those activities brought about a lot of fund transfer between Edo and Osaka for the sake of purchase and sales. It follows that some capital merchants began to settle only on the bookkeeping without the actual fund transfer. The money to be payable was called as 'Kawashi-gin'. This is just the prototype of remittance, so called, the domestic exchange the modern banks operates every day.
Before long, they became banks, which means transportation of silver in Japanese. For your information, the Japanese authority does not allow the exchange operation besides banks.
Domestic exchange in Japan
In modern, the electric banking makes us possible to settle on the ledger. It becomes very easy to send money from A bank to B bank. The system has been changed and both A bank and B bank have to hold their own current accounts in each counterparty.
The recent system has greatly changed. The central bank takes a main roll of financial markets. The Bank of Japan falls on it and the central bank behaves as the bank for banks. All banks in the private section are forced to have their own current accounts in the central bank accordingly to the reservation system regulated by BOJ acts.
It is the basic that the banks collect a lot of deposits to make loans, but they cannot loan out all the deposits because it means they have no room to withdraw any more. The reservation system helps banks in trouble by huge withdrawal at the same time, which requires some proportion of their liability to be reserved in the current account in the central bank. These current accounts makes it possible that the banks in private section can settle each other. In short, each bank send their money to another through the central bank.
Assuming that Mr. Taro in Tokyo would send the money to Ms. Hanako in Osaka, and Taro would go to the A bank in order to send money to B bank in which Hanako has her savings account. A bank have to take the relevant action to shift money in the Zengin system from A bank to B bank. Here, the Zengin system is used to offset all the balances relating to Yen transactions and the shortage arising from the Zengin system needs to adjust in the current account in the central bank. In this way, Ms Hanako gets the money without delay.
The domestic exchange generally means like this remittance workflow. For your information, the Bank of Japan is called as "Nippon Ginko" in Japanese as you can take a look at the bill at hand.