What Role Can Financial Policies Play in Revitalizing SMEs in Japan?
IMF Working Papers, December 11, 2012
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Bibliographic details
- Authors: Waikei R Lam, Jongsoon Shin
- Published: December 11, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475579376.001
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.
- 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.
- Addressing SMEweaknesses would improve private investment, enhance firm productivity, and lift growth.
Key findings
- Credit growth for SMEs has remained weak despite accommodative overall credit conditions.
- Many SMEs exhibit structural challenges: high leverage and low profitability.
- The global financial crisis further weakened SMEs’ financial positions, with disproportionate effects on firms with low credit worthiness.
- Low availability of riskcapital and pervasive credit support measures are central constraints to SME revitalization.
Policy recommendations
- Phase out costly government support measures to encourage the supply of risk-based capital.
- Accelerate SME restructuring to remove nonviable firms and reallocate resources.
- Deepen capital markets to enhance risk capital availability.
- Address regulatory barriers to starting businesses to facilitate new entry and dynamism.
Implications for growth and investment
- Improving access to risk-based capital and accelerating SME restructuring would:
- Improve private investment.
- Enhance firm productivity.
- Lift overall growth.
Subjects and keywords
- 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
Source: "What Role Can Financial Policies Play in Revitalizing SMEs in Japan?" by Waikei Raphael Lam and Jongsoon Shin, December 11, 2012 (IMF Working Paper).