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Enhancing the business operations of small and medium-sized companies is a major challenge for the Japanese economy. The government needs to carefully consider measures while taking into consideration technology and protecting jobs.
Prime Minister Yoshihide Suga has announced his intention to map out measures to improve the productivity of small and medium-sized enterprises, including support for realignment. He said the newly established Growth Strategy Council will discuss the issue and compile an interim report by the end of the year.
There are about 3.6 million small and medium-sized enterprises in the country, accounting for 99.7% of the total number of companies and about 70% of all employees. The novel coronavirus pandemic has deepened their predicament, especially in the restaurant and tourism industries.
In addition to providing cash benefits and measures for financing, it is reasonable to push for a drastic strengthening of business foundations. The use of mergers and acquisitions would be a potent option.
However, it is important not to be preoccupied with expanding scale and business efficiency; the role that each company plays in its industry and region should not be underestimated.
Konishi Decorative Arts & Crafts Co. President David Atkinson, who is regarded as one of the prime minister’s “brains,” has been selected as a member of the council. He has argued in books and other publications that there are too many small and medium-sized businesses and that they should be weeded out.
At a council meeting, Atkinson said the focus should be on the companies that are growing, not protecting all companies. He also calls for increasing minimum wages. The idea is to get companies that are unable to raise wages to leave the market.
Akio Mimura, the chairman of the Japan Chamber of Commerce and Industry, which represents the interests of small and medium-sized businesses, rejected such opinions, saying at a press conference, “I cannot agree.”
In the manufacturing industry, it is often the case that electronic parts, materials and other items made by local small and medium-sized companies support the advanced products of major companies. Service industries such as dining and retail may have low productivity, but they often provide important employment opportunities in regional areas.
Blindly pursuing redundancies or realignments should be avoided. Detailed measures that pay attention to the circumstances in each industry and each region are desirable.
There must be an improvement in the slow response to digitization among small and medium-sized companies and the widening productivity gap with large companies. Subsidies for information technology investment must be enhanced.
There has been a sharp increase in cases of businesses being suspended or closed due to circumstances such as aging business owners or a lack of successors. The government is considering subsidies and tax incentives to facilitate mergers and acquisitions of small and medium-sized companies. It is essential to make the most of such measures to assure smooth business succession.
There are many areas where structural changes in demand are occurring, such as the expansion of home delivery and online shopping due to the pandemic. It is also important to help small and medium-sized companies change their businesses.
