With local governments across Japan asking businesses to close their doors and residents to stay inside, small- and mid-sized firms are facing a coronavirus calamity.
A company may not have any sales, but that does not mean its rent and equipment lease payments disappear as well. Even if that enterprise is ordinarily a big earner, if it can't bring in cash in the near term, it may face collapse. There are growing numbers of business owners in Japan facing exactly this conundrum.
The government is aiding firms with what is effectively zero-interest and zero-collateral financing as well as subsidy payments. However, it takes a long time to process applications for this support, and the scale of the programs remains insufficient. The ruling and opposition parties have only now begun considering rent mitigation measures, and the aid may come too late for many.
Facing such difficult realities, the business community cannot afford to wait for government support programs to kick in, and must instead come together in mutual aid. For example, firms with some financial leeway could defer, reduce or exempt cash-poor clients' rent or lease payments. In short, we would like businesses to support one another with their financing.
This would certainly be a burden on the leasing and real estate industries in particular. But losing clients to the economic attrition of the coronavirus crisis would cause real damage. Indeed, these companies have an important role to play.
Depending on the industry, we are already seeing some signs of mutual support. In the auto sector, large firms are providing capital to smaller ones, and there are plans to create a joint fund to finance medium and small firms with important technological assets and expert employees.
Japan's large corporations have spent recent years tucking away large reserves of cash and other assets. Should they have even a little bit of breathing space, we call on them to use it to help preserve the country's industrial foundations.
It seems likely that small- and medium-sized businesses will worry that if they take financing, they will also have to allow the lender a say in their management. It is essential that big firms on the lending side retain the spirit of mutual help.
Meanwhile, there are also aging company owners who, facing a future with no successor, have elected to wind down their firms instead of weather the coronavirus storm. It is extremely important that other companies take on the employees and businesses from those that decide to throw in the towel.
Midsize and small businesses, with their proprietary technology and services, are an important part of the manufacturing supply chain. When parts makers, including smaller ones, were caught in the March 2011 Great East Japan Earthquake and tsunami disaster, it caused widespread production delays, and not just in Japan.
This country's robust manufacturing sector grew out of the strong, durable bonds of trust built up among companies. To make sure we can climb out of the economic doldrums of the coronavirus crisis, it is essential that the supply chain be maintained throughout.
Small- and medium-scale companies employ some 70% of Japan's workforce, and play an enormous role in local economies. The country's industrial sector is called upon to deepen cooperation to prevent degradation of manufacturing and keep lives and livelihoods stable.