By Kantaro Komiya
TOKYO (Reuters) – Nearly 68% of Japanese small and medium-sized businesses reported lower sales in July compared to the same month before the 2019 pandemic, according to a survey by credit firm Tokyo Shoko Research released Tuesday.
At the same time, 57% said they no longer needed emergency cash injections.
Both readings highlight how a sector that employs around 70% of Japan’s contract labor force, excluding agriculture and fishing, finds it thrives after, rather than surviving. during, the pandemic, and by extension the lasting impact of COVID-19 on the world’s third largest economy.
The Japanese government has injected billions of yen into the private sector since the start of the pandemic, with small and medium-sized businesses being the main beneficiaries.
The package reduced corporate bankruptcies from 7.2% in 2020 to 7,773, a three-decade low, according to a Tokyo Shoko Research survey released in January.
However, in a currently uneven recovery in which face-to-face service sectors lag behind manufacturers significantly, more companies are seeking help turning to a post-pandemic economy, said Mitsuhiro Harada, director of the Tokyo Shoko research division.
In Tuesday’s survey, covering 10,385 companies and conducted between August 2 and 11, 5.6% said they would consider a complete overhaul of their business, including liquidating debts with or without judicial review – plans that often require debt reduction efforts.
“The government’s initial aid package (for small and medium-sized enterprises) consisted of an injection … after an injection of money,” Harada said.
“But ironically, inflated debts could prevent some companies from participating in next-stage programs,” including those that support private investment for post-pandemic growth with public funding, he said.
So while bankruptcies might not skyrocket, corporate excess debt could continue to rise. “How to manage them has wider implications for Japan’s GDP and growth,” Harada said.
(Reporting by Kantaro Komiya; editing by John Stonestreet)