Recession-ravaged residents of this tiny hot-springs town found a way to improve their standard of living. Stuck with low-paying and seasonal tourism-related jobs, Yufuin's citizens solved a chronic yen-flow problem by boosting the local monetary supply: they print their own currency.

In Yufuin you can get a taxi ride, buy a bottle of sake, eat lunch, book a train ticket and supplement your wardrobe using a self-generated scrip the townspeople call yufu. "The yen isn't very stable anyway, is it?" says Ryuji Urata, a 38-year-old liquor-store owner who came up with the scheme two years ago. "So instead of being subject to what the national government does, we have our own strong currency."

"Strong" isn't the adjective that leaps to mind when one fingers the flimsy funny money. Roughly the size of a business card, the yufu doesn't have pictures of Presidents; it doesn't come in denominations (although by local convention one yufu is equal to 100 yen, or 75 cents.) The only embellishment distinguishing a yufu from a Post-it note is a rendering of the mountains that surround the town of 12,000 people in Oita prefecture on Kyushu Island.

Still, the scrip has value because villagers agree that it does. The system is a form of barter. Residents belong to a club with more than 100 members. Each offers a service provided in exchange for yufu. One woman teaches people how to wear kimonos. An unemployed man gives haircuts. Several townsfolk sell rides in their cars. "In Japan, if you do this kind of favor for someone, people won't accept money," says Urata. "But they'll accept yufu."

Barter allows villagers with little cash to trade labor for life's small necessities. When resident Tetsuro Yamamoto came down with a serious illness and had to be hospitalized last year, the group lavished yufu on him, which he used to pay part-time workers to assist his wife at their restaurant. "The government doesn't give me that kind of help," he says. "Yufu saved my life."

The community's adventure in economics has inspired dozens of other towns across Japan to dabble in their own currencies. In other countries, barter clubs are frowned upon because they can be used as a glorified tax dodge—people don't have to report yufu revenue, for example, or pay Japan's national 5% sales tax. (Yufuin itself doesn't have a local sales tax.) So far, tax authorities in Japan are looking the other way. "This kind of activity is not large enough to attract our attention," says Masaki Omura, a spokesman for the Ministry of Finance. Says Eisuke Sakakibara, the former Vice Finance Minister known as "Mr. Yen": "There's no deep implication to this. If it helps strengthen solidarity in a local community, that's probably good. In the end I think people want real money." Sometimes, though, the pretend money will do just fine. "It's all based on trust and credibility," says Mutsumi Nagai, a Yufuin restaurant owner who accepts two yufu for a 600-yen set lunch. Of course, basing financial transactions on trust instead of the national currency involves certain risks. If villagers can individually mint hundreds or even thousands of yufu, what's to prevent hyperinflation, with the locals carting wheelbarrows of Monopoly money to the neighborhood izakaya (bar)?

Checks and balances exist. Every yufu user is required to sign the notes they issue. Ultimately they will be called upon to redeem those notes by performing a service for the bearer. The specter of weeks spent washing other people's clothes after a yufu spending spree at the sake shop effectively limits the money supply. The moral: being your own central bank isn't so much fun when the yufu stops here.