What Role Can Financial Policies Play in Revitalizing SMEs in Japan?

December 11, 2012

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Waikei R Lam, and Jongsoon Shin. What Role Can Financial Policies Play in Revitalizing SMEs in Japan?, (USA: International Monetary Fund, 2012) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Bank credit, Banking, Credit, Credit risk, Economic sectors, Financial crises, Financial regulation and supervision, Global financial crisis of 2008-2009, Money, Small and medium enterprises

Keywords: Asset-based lending, Bank, Bank credit, Credit, Credit guarantees, Credit risk, Credit support measure, Financing, Financing facilitation, Global, Global financial crisis of 2008-2009, Guarantee program, Nonviable SME, Nonviable Smes, Small and medium enterprises, Small and medium-sized enterprises (SMEs), SME restructuring, SME sector, SME weakness, SMES business opportunity, Support measure, WP

Publication Details

Pages:

24
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/291
Stock No:

WPIEA2012291
ISBN:

9781475579376
ISSN:

1018-5941

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