Japan drafts aid plan for small businesses
Monday, 10 December 2007
Jonathan Soble from Tokyo
JAPAN is examining whether to expand a financial support programme of almost $1.0bn for small companies being squeezed by the rising cost of oil.
Yasuo Fukuda, prime minister, has instructed members of his cabinet to draw up proposals to help small businesses, which employ two thirds of Japanese workers but have fallen behind during the country's economic recovery over the past six years. Many parts and materials suppliers are having trouble passing on higher input costs to their larger corporate customers.
The central measure under consideration is an expansion of credit guarantees and low-interest loans by government-affiliated financial institutions, according to an official close to the discussions. Japan has provided Y99bn ($901m, euro611m, £437m) in loans and guarantees so far under an oil-price relief scheme launched in 2005.
The government might also instruct state-backed small-business lenders to be more lenient towards borrowers in sectors particularly hard-hit by oil-price rises, such as chemicals, cement and pulp and paper, the official said. Lenders would be asked to postpone the collection of some loans made outside the oil-relief scheme, meaning the total support package could be much larger.
Details of the aid plan are soon expected to be presented to cabinet for approval. Some funding could be included in a supplementary budget being hammered out by the government.
Profits at smaller businesses fell by 17 per cent in the third quarter, the latest government data showed, outweighing a 1.3 per cent gain at big companies and leading to the first fall in five years in Japan's aggregate corporate earnings.
Seiji Shiraishi, chief Japan economist at HSBC, said: "Higher costs at smaller Japanese companies are impairing their business and employment, which could blunt the growth of overall income and weaken personal consumption."
In an earlier survey published by the Ministry of Economy, Trade and Industry, 68 per cent of small companies said they were finding it "difficult" or "somewhat difficult" to pass on rising oil costs to their customers, up from 60 per cent three months earlier. Economists say competition from China and other low-cost countries and the breakdown of once close-knit networks of suppliers and manufacturers are to blame.
Concerns about the plight of small businesses are tied to broader worries about social and economic inequality, which has increased slightly during the recovery period.
Promises of more aid for small businesses helped the opposition Democratic Party of Japan trounce the ruling Liberal Democrats in Upper House elections in July.
Quasi-public institutions, such as the Japan Finance Corporation for Small and Medium Enterprise, provide five-year loans at discounted rates of 2.2 to 2.4 per cent. Additional credit guarantees allow small companies to borrow from private sector banks at lower rates than they would otherwise be able to obtain.
..........................................
— FT Syndication Service
JAPAN is examining whether to expand a financial support programme of almost $1.0bn for small companies being squeezed by the rising cost of oil.
Yasuo Fukuda, prime minister, has instructed members of his cabinet to draw up proposals to help small businesses, which employ two thirds of Japanese workers but have fallen behind during the country's economic recovery over the past six years. Many parts and materials suppliers are having trouble passing on higher input costs to their larger corporate customers.
The central measure under consideration is an expansion of credit guarantees and low-interest loans by government-affiliated financial institutions, according to an official close to the discussions. Japan has provided Y99bn ($901m, euro611m, £437m) in loans and guarantees so far under an oil-price relief scheme launched in 2005.
The government might also instruct state-backed small-business lenders to be more lenient towards borrowers in sectors particularly hard-hit by oil-price rises, such as chemicals, cement and pulp and paper, the official said. Lenders would be asked to postpone the collection of some loans made outside the oil-relief scheme, meaning the total support package could be much larger.
Details of the aid plan are soon expected to be presented to cabinet for approval. Some funding could be included in a supplementary budget being hammered out by the government.
Profits at smaller businesses fell by 17 per cent in the third quarter, the latest government data showed, outweighing a 1.3 per cent gain at big companies and leading to the first fall in five years in Japan's aggregate corporate earnings.
Seiji Shiraishi, chief Japan economist at HSBC, said: "Higher costs at smaller Japanese companies are impairing their business and employment, which could blunt the growth of overall income and weaken personal consumption."
In an earlier survey published by the Ministry of Economy, Trade and Industry, 68 per cent of small companies said they were finding it "difficult" or "somewhat difficult" to pass on rising oil costs to their customers, up from 60 per cent three months earlier. Economists say competition from China and other low-cost countries and the breakdown of once close-knit networks of suppliers and manufacturers are to blame.
Concerns about the plight of small businesses are tied to broader worries about social and economic inequality, which has increased slightly during the recovery period.
Promises of more aid for small businesses helped the opposition Democratic Party of Japan trounce the ruling Liberal Democrats in Upper House elections in July.
Quasi-public institutions, such as the Japan Finance Corporation for Small and Medium Enterprise, provide five-year loans at discounted rates of 2.2 to 2.4 per cent. Additional credit guarantees allow small companies to borrow from private sector banks at lower rates than they would otherwise be able to obtain.
..........................................
— FT Syndication Service