Japan to secure $9.3bn in capital for coronavirus-threatened SMEs

TOKYO — The Japanese government will set up a program to inject capital directly into financially troubled small- and medium-sized businesses — key drivers of regional employment and economic growth — that have fallen into serious difficulties due to the impact of the coronavirus, Nikkei has learned.

Under the program, a maximum of 1 trillion yen ($9.39 billion) will be set aside by the Regional Economy Vitalization Corporation — a joint public-private fund — to rescue companies that cannot be saved only through loans. The framework will allow investments as large as 10 billion yen per company.

As elsewhere, the coronavirus has wrought havoc on Japan’s economy as people are being urged to refrain from going out or travel for pleasure. Foreign tourist arrivals have decreased sharply and many small businesses have been asked to suspend operations or encourage teleworking amid a national state of emergency.

Prime Minister Shinzo Abe declared the crisis measure earlier in April and said it would last until May 6, but now plans to extend it to further encourage social distancing to bring the spread of infections under control. Business-suspension requests by local governors are also expected to last for an extended period.

Support for financially stricken businesses in Japan typically comes in the form of loans from the governmental or private financial institutions, but the new program aims to support companies that need more than simple borrowing.

The target of the set-up will mostly be core local companies across Japan with minimum annual sales of 1 billion yen and at least 50 employees, though there will be some leeway. Companies that could qualify for the program represent a little more than 10% of the country’s some 3.5 million small- to medium-sized businesses. The target would be those where a collapse could deal a serious blow to a regional economy, potentially triggering a domino effect via a series of bankruptcies or financial uncertainty.

The program will consider investing in companies that have seen their sales fall sharply and loans are deemed insufficient to keep them afloat. Target companies are believed to include those in the hotel, tourism, logistics and retail industries, as well as subcontractors of large companies.

The government plans to introduce additional measures if it judges further support to businesses becomes necessary due to strains from the coronavirus.

The program’s scope excludes companies that have struggled since before the spread of the coronavirus infection and are deemed to have little chance to rebuild. 

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