Small And Medium Sized Enterprises In Japan

Seminar paper from the year 2003 in the subject Business economics - Offline Marketing and Online Marketing, grade: 1,0, University of Northampton, language: English, abstract: Japan is the second largest industry nation in the world. At the end of World War II Japan was in ruins and lagged far behind the industrialized and experienced western nations. However, it has managed to compete against almost all other countries in relatively short time without any appreciable help. The small and medium-sized enterprises (SMEs) as the main corporation form have played a crucial role for the country’s miracle and development of the modern economy after the war, as large companies were all destroyed, people have lost their livelihood and world markets were shrinkage. Today, the small and medium-sized enterprises are still serving as the driving and dominant force for the domestic economy. According to JETRO (2002), the total number of small and medium-sized enterprises in Japan are 6.51 million, which represent 99.1 % of the total businesses (excluding primary industry); SMEs’ contribution amounts to 81% of the total employment (excluding employment in the prime industries), 51.7% of the total shipment of manufacturing industry, 61% of the total sale in the whole sale and 78% in the retail. Clearly, the growth of the Japanese SMEs depends on several success factors, such as technologies, marketing skills, capital funds and effective resource management in the last four decades (Ohmea, 1982). However, some western countries like U.K. and France were using the same development strategy as Japan after the World War II, and their economies still declined dramatically competing with Japan. Therefore, there must be some special influential factors in the Japanese companies that are totally different from western models. This paper focuses mainly on the socio-cultural development of SMEs in Japan with typical Japanese characteristics and analyses the influential yet distinguishing success factors and their implications for the Japanese SMEs. The paper will further approach the socio-cultural disadvantages of the existing systems and the government roll for Japanese SMEs and draw conclusion in the last section.

Productivity growth in Japan, as in most advanced economies, has moderated. This paper finds supportive evidence for the important role of small and medium-sized enterprises (SMEs) in explaining Japan’s modest productivity growth. Results show a substantial dispersion in firm-level productivity growth across sectors and even across firms within the same sector. SMEs, on average, exhibit lower productivity growth than non-SMEs in Japan, with smaller and older SMEs showing particularly low productivity growth. Estimates suggest that boosting productivity growth in all of the worst-performing SMEs could improve overall productivity growth by up to 1.8 percentage points. The SME credit guarantee system, SME financing constraints, demographic factors, and lack of intangible capital investment are discussed as contributors to the slow productivity growth of Japan’s small and old SMEs.

Comprehensive analysis of the significant but often overlooked role of small firms in Japan's economy.

Analysis of information published in the White paper on small and medium enterprises in Japan

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.