Supporting entrepreneurs (Venture Fair Japan 2006)

There are 4.3 million Small and Medium Enterprises (SMEs) in Japan, constituting 99.7% of all enterprises and accounting for 70% of all employment. From these facts we can easily understand that SMEs form the framework of the Japanese economy, and that real revitalization of the Japanese economy is impossible without the revitalization of SMEs.

Japan has long suffered from damage inflicted by the collapse of the bubble economy. The task of the Small and Medium Enterprise Agency is providing strong back-up to energetic SMEs that have a bold spirit of tackling challenges, because they are the driving force behind economic revitalization and job creation, and are poised to resuscitate the Japanese economy as it emerges from a prolonged slump and prepares to leap ahead. The Small and Medium Enterprise Agency is therefore making its best efforts to have a financial safety net in place for SMEs and to support their revitalization, so that they may further enhance their competitiveness and capitalize on their sophisticated technologies (which cannot be imitated by big businesses) or secure a field where they can actively participate, and thereby achieve in the competitive global market.

There are approximately 4.3 million small and medium enterprises (SMEs) in Japan constituting 99.7 percent of all companies, and roughly 28 million employees working at SMEs, who account for 71 percent of all workers. Japan's SMEs come in thousands of varieties, ranging from world-leading technology firms to the neighborhood candy stores still so popular with children; these small- and medium-sized businesses form the real foundation of the Japanese economy. After many years of recession following the collapse of the economic bubble, the Japanese economy is now starting to show some encouraging signs. New economic growth depends on how active a role the SMEs and entrepreneurs who support our economy can play in supporting such expansion.

Many entrepreneurs emerged from the devastation of the postwar period determined to build a new Japan. This was the beginning of Sony, Honda, and other companies which have since grown into world-leading manufacturers, and which also powered Japan's high level of economic growth. Now a new movement is needed to spur the creation of a succession of new companies to revitalize the Japanese economy. The business start-up rate in the years after the collapse of the bubble economy has been sluggish, but as economic indicators show signs of recovery, the time is right to help many unsuccessful entrepreneurs rise again. Furthermore, in order to build a society in which people can take a series of chances, support for startups by people who have failed at "business" before is important.

Because raising capital is the greatest difficulty for people starting over again, the Agency promotes the establishment of financing and guarantee systems and financing that does not depend on personal guarantees. Moreover, it has established consultation counters where small and medium enterprises with uncertain prospects can receive advice about shifting to a different business or starting over before they rack up heavy debts.

SMEs fulfill a very large role in the economic revitalization of the regions and in ensuring employment. In the continuing severe economic situation, however, many of these enterprises are suffering under extremely difficult administrative conditions despite having great skills. The Agency is employing measures to revitalize the small and medium enterprises that form the core of regional economies by establishing "SME Revitalization Support Committees" in every prefecture and setting up "Regional SME Revitalization Funds" in various areas.

Furthermore, the Agency backs up new small and medium enterprises nationwide with 180 Senior Adviser centers that support startups and management innovation and nine Regional Strategy Conferences for Supporting New Partnerships that support new business activities ("new partnerships") that bring together small and medium enterprises from different fields.

In addition, in order to support the development and commercialization of new products and services generated by SMEs, products and services that make use of local resources (production area technology, regional agriculture, forestry, and fisheries products, tourism resources) that are regional strengths, the Agency works to create environments, including new laws and regulations, that support the independent and sustained growth of local firms.

How have Japan's manufacturing industries, such as the automotive and consumer electronics industries, been able to stay competitive internationally? They have been competitive thanks to the existence of SMEs equipped with high-level technologies that serve as the basis for manufacturing, such as stamping, plating, and casting. It is essential to maintain or strengthen the competitiveness of these "Monodzukuri (Manufacturing) SMEs" so that key industrial sectors, including leading-edge industries such as the fuel cell and home information appliances industries –which are expected to drive Japan forwards in the future– may make full use of their competitive advantage so as not to fall behind other countries.

To that end, to strongly support these firms, the Agency will formulate advancement guidelines for the direction in which SMEs should move based on the Small and Medium-sized Enterprise Basic Act. This will develop support policies in accordance with this direction to foster an environment that backs up R&D, human resources development, and so on.

SMEs underpin manufacturing

A cutting-edge SME which manufactures molds for mobile phones

SMEs are fulfilling a major role in the economic revitalization of the regions and in ensuring employment. In the continuing severe economic situation, however, many of these enterprises are suffering under extremely difficult administrative conditions despite their great skills, due to the difficulty of capital procurement. METI is employing measures to revitalize SMEs in the regions and restore regional dynamism with the establishment of "SME Revitalization Support Committees" in all prefectures, and the setting up of a "Regional SME Revitalization Fund" operated by the Organization for Small and Medium Enterprises and Regional Innovation, with the intention of revitalizing the SMEs that form the core of regional economies. In 2005, the "Regional Strategy Conference for Supporting New Partnerships" was set up in nine different places throughout Japan. The conference is an organization designed to provide assistance for new business activities ("new partnerships") by SMEs from different sectors, each bringing their own technology and know-how. Principally through this organization, we provide consistent support (from business planning to commercialization) for SMEs countrywide who are establishing new businesses.

Because of their small scale, SMEs tend to be fragile and are seriously affected by external factors such as economic globalization, financial system instability, and other rapid changes in the economic environment. Another role of the SME Agency is to prevent a highly motivated, capable SME from going bankrupt because of financial difficulties. Specifically, we have implemented all necessary safety-net measures, including safety-net loans and guarantees and a debt rollover guarantee program to ensure easier financing.

Furthermore, to promote loans that are not over-dependent on collateral or personal guarantees, the Agency has established a system for loans secured by inventory or account receivables. The Agency also works to establish and improve financing and guarantee systems that do not require personal or third-party guarantees, thus facilitating easier and more diverse financing for SMEs.

Developing attractive shopping areas

In recent years, factors such as the suburbanization of towns have added to an increasingly harsh situation for shopping areas. The revitalization of downtown areas is an urgent issue. In order to realize compact and lively urban development, the Small and Medium Enterprise Agency will revise the Central City Invigoration Law and other related laws to provide support - which will be prioritized through selection and concentration - to regions that make integrated efforts to concentrate city functions in urban areas in an effort to revitalize city center areas. Furthermore, the Agency provides wide-ranging and detailed support for other shopping areas nationwide.