Govt plans to step up support for midsize firms

Yomiuri Shimbun file photo
The Diet Building in Chiyoda Ward, Tokyo, Japan.

The government will step up its support for midsize companies, which are said to have been short-changed by previous support measures, and the restaurant and lodging industries, which have been reeling from declined footfall and shortened business hours, according to an outline of the government’s new financial support measures in response to the spread of the novel coronavirus.

Government-affiliated financial institutions such as the Development Bank of Japan Inc. (DBJ) and Shoko Chukin Bank, Ltd. will be allowed to provide subordinated loans, which have a lower repayment priority than normal loans, to midsize companies with less than ¥1 billion of their own capital. Under current regulations, such subordinated lending has been contingent on private financial institutions providing matching loans of the same amount.

Although the interest rate on subordinated loans to midsize companies has exceeded 5% in some instances, the new proposal would entail lowering the rate to about 1% for the first three years.

The government has been supporting smaller businesses by having private financial institutions provide unsecured loans that are effectively interest-free. But midsize companies have been excluded from the system, prompting calls from officials within the government and ruling camp for more to be done.

Meanwhile, the DBJ will establish a fund as early as within this month for the beleaguered restaurant and lodging industry, and will also create a specialized team tasked with enhancing support for the sector. The bank also expects to accelerate the loan screening period to about one month.

To bolster support for the food service industry, the government will expand debt guarantees for loans provided by private financial institutions. Using a fund set up with subsidies from trade associations and the Agriculture, Forestry and Fisheries Ministry, the government will raise the maximum amount of eligible loans from the current ¥100 million to ¥200 million.

At a press conference on March 18, Prime Minister Yoshihide Suga said, “We will promptly put together financial measures to support the continuity of restaurants and other industries that have been responsible for a great many jobs.”