Japan Press Weekly

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2013 February 13 - 19 [ECONOMY]

Keep lifeline to SMEs

Akahata editorial (excerpts)

The SME Financing Facilitation Act which secures funds for small- and medium-sized enterprises will expire at the end of March, possibly leading to a rise in the number of business closures and bankruptcies.

The Act requires financial institutions to positively respond to SMEs applying for a change in their loan conditions such as to ease loan interest burdens and lower the repayment amount. The Act took effect after the failure of Lehman Brothers in 2008 as a means to support ailing SMEs. About 300,000 - 400,000 SMEs are said to benefit from this act, contributing to a slowdown in the number of bankruptcies from cash-flow problems.

Business failures centering on the transportation industry increased in January. Corporate restructuring in the electronics manufacturing sector will push up not only the number of laid-off workers but also the number of cash-strapped subcontractors. Banking institutions are still reluctant to lend money to small businesses. At a time when SMEs are experiencing difficulties, it is a matter of course for the banks to meet their social responsibility and relax loan conditions in order to help SMEs. It is necessary to extend the expiration date and further improve the usability of the Act.

The government has little enthusiasm to bail out SMEs. In the FY2013 budget, the government will allot only 181.1 billion yen to smaller businesses, far short of military spending which has swollen to 4.7 trillion yen. The SME-related money will be even smaller than the so-called “sympathy” budget which Japan has no obligation to provide for the stationing of the U.S. forces in Japan and the budget for the U.S. military realignment combined.

To provide generous support to SMEs which represent 99% of all business entities and generate 70% of jobs in Japan is a key to overcoming the present deflationary recession and promoting a domestic demand-driven economy.