Small, midsize firms...

Small, midsize firms need govt lifeline

The Yomiuri Shimbun

In recent years, Japan has seen a sharp increase in the number of small and midsize corporations going out of business, with only a small increase in the number of new companies being established. This state of affairs could hamper efforts to maintain the vigor of the economy.

According to the Economy, Trade and Industry Ministry's "White Paper on Small and Medium Enterprises in Japan" for 2006, there has been a gradual improvement in the business sentiment of small and midsize corporations as a result of their successful efforts to bring themselves out of a deflationary slump. Despite this promising sign, there has been no end to the declining number of small and midsize enterprises.

During 2001 to 2004, around 290,000 companies in this category closed down each year, with about 170,000 companies being set up annually during the period. This means the number of small and midsize corporations decreased by about 120,000 every year during the four years.

Today, there are about 4.33 million small and medium enterprises, a decrease of 1 million from 1986, when the figure peaked at 5.33 million.

The industrial sector of society needs constant refreshment, with new corporations established and existing firms going out of business. This is a natural concomitant to capitalism.

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Age taking its toll


However, it is disturbing to note that one-fourth of small and medium business operators who closed their companies during the 2001-04 period cited difficulties in finding successors as a reason for closing up shop. A fairly large number of proprietors gave up their businesses despite their companies enjoying good financial health.

The Economy, Trade and Industry Ministry and the Small and Medium Enterprise Agency are considering measures to help small enterprises stay in business, for example, by providing advice in cooperation with chambers of commerce and industry in many parts of the nation.

An organization must be established to help small and medium company owners find strongly motivated personnel from outside to take over their business, instead of expecting them to look for such persons among family members, relatives and employees. This should be complemented by efforts to encourage mergers and acquisitions involving small and medium enterprises, to provide young ambitious persons with greater chances to take over the companies run by older people.

According to the white paper, the average age of owners of small and medium businesses was 58.5 in 2002. The average age of such managers aged 55 and older who expressed their wishes to retire from their business was 65.1.

These figures show that small business owners who started their business during the years of high economic growth have now grown old, meaning a large number of them will retire within the next several years.

The rapid increase in the average age of small and medium business operators may compare with the so-called 2007 problem, namely, the difficulty in passing on to younger employees the skills and expertise accumulated by a massive number of baby-boomers retiring from work. The aging of small business owners may prove to be a turn of events in the Japanese economy.

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Women, elderly have key role


Increasing the number of new small and medium corporations would do much to prevent a further decline in the number of such companies.

In recent years, a growing number of women and elderly people have been starting business in such categories of industry as the service, wholesale and retail sectors. There has also been a rise in the number of women and aged people who want to establish enterprises.

The key to success in ensuring economic growth for an aging society with a declining birthrate lies in how to put the abilities of women and elderly people into full play. We welcome their eagerness to start businesses. We also place our hopes in the desire of the baby-boomer generation to take on new challenges after they reach retirement age.

The Corporate Law, which took effect this month, has abolished the minimum wage system while also allowing anyone to establish a corporation even if he or she has no capital fund.

The government should further improve its programs designed to help people start business to increase the number of highly active small and medium companies. Doing so will provide momentum for revitalizing the economy.


(From The Yomiuri Shimbun, May 8, 2006)

(May. 8, 2006)