TOKYO – The percentage of small and medium-sized enterprises required to suspend or stop their operations in Japan amid the new coronavirus pandemic appears to have remained lower than in many other countries.
According to the Organization for Economic Co-operation and Development, the percentage in Japan reached 10% in May, well below the overall figure of 26%. Japan’s downside is attributed to the lack of strict blocking measures introduced in Europe. However, the economic crisis can last a long time if infections spread widely.
Experts believe that one key thing to monitor is the duration of the effect of public aid measures that have been taken, adding monetary aid.
Royal Oak Resort, a hotelier from the western Japanese city of Otsu, pleaded voluntary bankruptcy in April.
“We were forced to operate after the government declared a state of emergency and this prevented us from charting a course for recovery,” said a former corporate informant.
The OECD has had Facebook’s cooperation on the corporate scene with up to 500 workers in more than 500 countries.
June data for some 25,000 companies show that 33% of companies connected were sometimes forced to carry out their operations or close permanently.
The figure is 31% for the industry and 19% for hotels and restaurants. Business has basically fallen into corporations that offer facilities to consumers face-to-face due to restrictions aimed at preventing the spread of coronavirus.
According to Teikoku Databank, which filed for bankruptcy as a result of COVID-19 totaled 458 in Japan. More than 80% of them were small or medium-sized.
However, these small businesses in Japan seem to be working well overall. The proportion of companies that suspended or closed 10% in Japan completely from January to May, when the OECD counted the country’s figures, compared to more than 20% of the United States.
The overall figure for the first five months to May 26% and remained high at 18% in June, when the economy gradually recovered.
“Consumer confidence has dramatically worsened in Europe, where closures have been introduced, and in the United States, where layoffs have increased dramatically,” said Hideo Kumano, a leading economist at the Dai-ichi Life Research Institute. “Trade suspensions and closures are higher in these regions.”
But things were other in Japan. “Extensive measures that are not seen in other countries, such as interestless and unsecured loans, have a lot to do with lower-affected Japanese corporations,” Kumano said.
However, there is little room for optimism. According to Japan’s Small and Medium-sized Enterprises Agency, the average restaurateur has enough money to pay the ongoing costs, adding up the rent and interest accrued for 5.4 months, while the figure for an average operator is 6.6 months. This means that these corporations would face an existential crisis if they did not record any billings for six months.
A survey conducted from last July to mid-August through Tokyo Shoko Research shows that 9% of small and medium-sized enterprises “could end down” if the pandemic lasts an extended period. Almost part of that percentage said it would close within a year if I made the decision to do so.
The Bank of Japan’s Tankan Business Confidence Survey in June found that the leading indicator of small and medium-sized business confidence in 3 months fell to minus 38 from at least 33 today, indicating a pessimistic outlook for giant companies, which hoped to improve.
Another thing that should not be overlooked to Japan is that many low-growth corporations have remained afloat due to a side effect of large-scale financial easing that remained in position long before the coronavirus appeared. Because these corporations rely heavily on government support, they may in fact have little strength to get out of their recession.
In the United States and Europe, where the proportion of businesses that suspended or closed in the midst of COVID-19 is high, the final business and newly created business rate exceeds 10% consistent with the year, suggesting a trend towards innovation for corporations to emerge and stimulate the economy.
If the ideal industry is one that revitalizes itself by renewing its constituent companies and brings labor movement to areas of expansion, then such an industry is difficult to locate in Japan.
The number of coronavirus infections is spreading in Japan and abroad. This means that restrictions on economic activity are likely to be maintained for an extended period of time. In the United States, the increase in unemployment benefits and task coverage measures expired in early August. Discussions between political parties have encountered an obstacle in Congress because the country’s political resources are limitless.
The broader the policy measures, the harder it will be to find a way out. A BOJ official said his crisis control measures “must end faster or later” and that it is “very difficult to get to the right time.”
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