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

 
Author/Editor: Lam, Raphael ; Shin, Jongsoon
 
Publication Date: December 11, 2012
 
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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.
 
Series: Working Paper No. 12/291
Subject(s): Corporate sector | Japan | Financial sector | Credit policy

 
English
Publication Date: December 11, 2012
ISBN/ISSN: 9781475579376/2227-8885 Format: Paper
Stock No: WPIEA2012291 Pages: 24
Price:
US$18.00 (Academic Rate:
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