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METI Formulates a Tool for Business Diagnoses Named Benchmarks for Local Companies (“Local Benchmark”)-Interim report compiled by the Study Group on Methods and Indexes for Assessing Local Companies-

The Ministry of Economy, Trade and Industry (METI) has formulated Benchmarks for Local Companies, which leaders including company managers and entities including financial institutions and supporting organizations can utilize as a tool for conducting business diagnoses, in other words, a tool for understanding the financial conditions of companies.

1. Background to the formulation of the Benchmarks for Local Companies

The population of Japan has been decreasing since 2008, and it is necessary for local companies to continue to create added value and employment in order to create sustainable economies in local areas, particularly in those areas where the population has begun to drastically decrease. To this end, meetings of a study group have been held since May 2015 to discuss the Benchmarks for Local Companies, which are methods and indexes for assessing companies that can be utilized to obtain reference information when measures including support for the management of local companies are taken.

2. Outline of the Benchmarks for Local Companies

The Benchmarks for Local Companies are tools for conducting business diagnoses and serve as a basic framework for leaders, including company managers, and external entities such as financial institutions, as well as supporting organizations, to understand the financial conditions of companies and to hold dialogues based on common standards. Also, these Benchmarks are expected to be utilized as a gateway to business viability assessments.
Specifically, company managers and external entities can understand the business conditions of companies and find out changes in these conditions at an earlier stage by inputting data on financial information (six indexes*1) and data on non-financial information (four perspectives*2) into a reference tool (software application) to be released along with the Study Group’s interim report, so as to facilitate dialogues and provide support at an earlier stage.

*Note 1: Six indexes: (i) rate of increase in sales (whether or not companies can keep securing sales), (ii) operating profit margin (profitability), (iii) labor productivity (productivity), (iv) ratio of EBITDA (earnings before interest, taxes, depreciation, and amortization) to interest-bearing debts (soundness), (v) working capital turnover period (efficiency), and (vi) capital adequacy ratio (safety)
*Note 2: Four perspectives: (i) focus on managers, (ii) focus on parties concerned, (iii) focus on business, and (iv) focus on internal control systems

Screenshot of the reference tool for the Benchmarks for Local Companies

Poster on the Benchmarks for Local Companies

Release date

March 4, 2016

Division in Charge

Industrial Finance Division, Economic and Industrial Policy Bureau

Related Information

Industrial Finance

Last updated:2016-03-14
Ministry of Economy, Trade and Industry1-3-1 Kasumigaseki, Chiyoda-ku, Tokyo 100-8901, Japan Tel: +81-(0)3-3501-1511
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