The number of companies that have gone belly up without going through bankruptcy procedures has been slowly increasing.
According to a survey by Teikoku Databank, a private credit-research firm, the number of voluntary company closures and dissolutions, including cases in which company owners have just disappeared, has been three times that of companies seeking bankruptcies, either through legal liquidation or suspension of transactions with banks.
This means that with about 13,000 bankruptcies in 2009, it is estimated that about 40,000 other companies simply vanished.
There are about 7,000 offices in Higashi-Osaka, Osaka Prefecture. A metal processing firm there closed in November after 42 years in business.
Due to the widespread economic downturn triggered by the global financial crisis in autumn 2008, the orders received by the metal processing firm decreased by 90 percent. The company owner decided to shutter operations due to his lack of a successor and the expected prolonged business malaise.
The owner reportedly considered passing on his basic skills to others at nearby companies. However, other surrounding businesses in the same industry also began to close or scale down operations, and the owner had to abandon his mentoring plans.
His wife expressed her anxiety, saying: "There are no young people to pass our skills to. And it looks like the foundation for traditional manufacturing could collapse."
A food manufacturer in the same city also closed in November, mostly due to cash-flow problems. The owner stopped operations, saying: "I feel as if we've been working for 25 years just to repay our loans. Even if the economy improves now, it would be four to five years before we could truly feel the benefits."
Worries over debts
In order to overcome this crisis facing small and midsize companies, it is indispensable to quickly spread and improve economic safety nets for them.
Based on a law for granting debt repayment moratoriums for small and midsize companies, which was enacted under the prodding of Shizuka Kamei, state minister in charge of financial services, financial institutions have provided counseling for small and midsize companies over debt repayment moratoriums and related matters. There were about 20,000 cases of consultations by small and midsize companies with major banks in December alone. The services under this law are indeed a shelter for the companies in stormy times.
But many small and midsize companies fear that once they are granted debt repayment moratoriums, they will never again be approved for loans. It is necessary to promote operational improvements in the system.
Welfare, health care jobs
In the rapid economic growth era of the mid-1950s to early 1970s, industrial parks were developed across the country with localities vying to attract enterprises to these zones. However, we cannot rely on economic stimulus from these factories that were so successful in the past but now suffer declining demand and fierce overseas competition.
The Kameyama municipal government in Mie Prefecture lured Sharp Corp.'s liquid crystal display factories, and was dubbed a model for local governments attracting enterprises.
However, last summer Sharp sold off some of its facilities at one of its Kameyama factories to a Chinese company due to a decline in demand and flagging profitability.
Even if companies and factories are located in a certain prefecture or city, they might suddenly close shop or move to other countries. To prepare for such an industrial hollowing out, it is necessary to create new industries that utilize current human and material economic resources.
In underpopulated areas and localities having so-called marginal communities, the demand for welfare and health care is larger than in urban areas.
Job offers are markedly increasing from social security-related firms, including medical and nursing care companies, and at corporate introduction and job interview meetings held in localities for high school and university students.
In one prefecture, such job offers reportedly comprised about 60 percent of the total.
In this field of business, which has been positioned as "administrative services," the introduction of drastic deregulation, subsidies and preferential treatments may result in concentration of private capital and thus create a major job market.
Tap regional vitality
Regional economies now find themselves between a rock and a hard place due to the decline in population and decreased consumption. Nevertheless, some local governments have found glimmers of hope.
At shopping arcades in Kurume, Fukuoka Prefecture, the decline in the number of occupied shops, which had been going on for years, has stopped. Credit is being given to "B-1 Grand Prix," a competition held in the city last autumn featuring dishes from cities around the country.
More than 200,000 visitors came from all over the country for the two-day event. Shop owners along the arcades were surprised with the popularity of the event and their zeal for maintaining or opening new shops was greatly improved.
Meanwhile, other places have seen a jump in the number of domestic and foreign tourists after the areas were used to shoot films and TV dramas.
In some areas of Hokkaido and Okinawa Prefecture, localities promoted community development to better serve the lives of their aging residents. As a result, older people have moved from other areas to these locations in Hokkaido and Okinawa Prefecture, which has helped stop their population declines.
Even though it is indeed very difficult to maintain such effects, the ideas garnered from the attempts may result in breaking through the deadlock.
Localities should to demonstrate innovation and the ability to get things done in order to make such positive changes permanent.
