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What Role Can Financial Policies Play in Revitalizing SMEs in Japan?
Author:
Mr. Waikei R Lam
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and
Mr. Jongsoon Shin
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Series:
IMF Working Papers
Volume/Issue:
Volume 2012: Issue 291
Language:
English
Publication Date:
11 Dec 2012
DOI:
https://doi.org/10.5089/9781475579376.001
ISBN:
9781475579376
ISSN:
1018-5941
Pages:
24
Keywords:
WP; bank; financing; nonviable Smes; support measure; Small and medium-sized enterprises (SMEs); credit guarantees; credit support measure; nonviable SME; SME restructuring; financing facilitation; SME sector; SMES business opportunity; asset-based lending; SME weakness; guarantee program; Credit; Global financial crisis of 2008-2009; Credit risk; Small and medium enterprises; Bank credit; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The paper discusses the role the financial sector can play in supporting growth in Japan. While overall credit conditions have been accommodative, credit growth has remained weak, especially for small and medium-sized enterprises (SMEs). Firm-level SME data and sectoral corporate balance sheets show that many SMEs have faced structural challenges of high leverage and low profitability. Moreover, the global financial crisis has weakened the financial position across SMEs, particularly for those with low credit worthiness. These challenges are closely related to low availability of riskcapital and the pervasiveness of credit support measures. This paper argues that to encourage the supply of risk-based capital, costly government support measures should be phased out and SME restructuring be accelerated. Efforts are also needed to deepen capital markets to enhance risk capital availability and address regulatory barriers to starting businesses. In that regard, addressing SMEweaknesses would improve private investment, enhance firm productivity, and lift growth.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2012: Issue 291