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2012 White Paper on Small and Medium Enterprises in Japan

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2012 White Paper on Small and Medium Enterprises in Japan 2012 White Paper on Small and Medium Enterprises in Japan Small and Medium Enterprises Moving Forward through Adversity Copyright © 2012 Ministry of Economy, Trade and Industry and Japan Small Business Research Institute First printing: September 2012 All rights reserved. This publication, or parts thereof, may not be reproduced in any form for resale or other commercial purposes unless written permission has been expressly given. Private, educational, institutional or other non-profit organizations may consider permission to have been herein granted for any necessary reproduction provided that a copy of any publication in which it appears is forwarded to Japan Small Business Research Institute at the address shown at the bottom of this page. Edited by SMALL AND MEDIUM ENTERPRISE AGENCY MINISTRY OF ECONOMY, TRADE AND INDUSTRY Translated by JAPAN SMALL BUSINESS RESEARCH INSTITUTE Printed in Japan Not for Sale Contact Information Editor: Kunio Maeda Associate Editor: Toshiaki Tokita Mailing address: International Exchange Department Japan Small Business Research Institute Sanbancho-KS Bldg., Sanbancho 2 Chiyoda-City, Tokyo 102-0075 Japan Tel: +81-3-3222-3431 E-mail: [email protected] URL: http://www.jsbri.or.jp Foreword This is a complete English translation of the 2012 White Paper on Small and Medium Enterprises in Japan: Small and Medium Enterprises Moving Forward through Adversity, which summarizes recent developments among small and medium enterprises (SMEs) in Japan. It was translated and published by the Japan Small Business Research Institute with the approval of the report’s original author, the Small and Medium Enterprise Agency, Ministry of Economy, Trade and Industry, which submitted the original to the Diet. Although the Japanese economy was severely affected by the Great East Japan Earthquake in March 2011, it began to improve some three months later driven mainly by expanding personal consumption and growth in automobile production and shipments as supply chains were restored. However, the emergent European debt crisis, wider economic slowdown overseas, and continued appreciation of the yen have caused the pace of recovery to gradually weaken and clouded the outlook. Set against this backdrop, this year’s White Paper focuses on SMEs’ potential in terms of their flexibility and ability to precisely meet local needs. In the process, it demonstrates how local SMEs are expected to play a major role in community development and regional reconstruction. While the effects of the earthquake and ensuing disasters were surveyed and analyzed in the 2011 White Paper, this year’s White Paper examines them in further detail, considers the role played by SMEs in reconstruction and community development in the affected areas, and provides extensive first-hand coverage of local SMEs’ views on reconstruction. As in previous years, the SME policies being implemented by the Government of Japan are summarized at the end of this volume. The diverse measures being taken by the Japanese authorities include earthquake-related measures introduced in readiness for when reconstruction from the earthquake and ensuing disasters begins in earnest, such as financial assistance and tangible and intangible forms of support for recovery projects, along with assistance to help SMEs do business overseas and strengthen their technological capabilities. I hope that this report will help researchers and others with an interest in SMEs throughout the world to gain a better understanding of measures and developments concerning SMEs in Japan, and that it also contributes to SMEs’ development worldwide. Masataka Nakano Chairman Japan Small Business Research Institute September 2012 On publication of the 2012 White Paper on Small and Medium Enterprises in Japan The Japanese economy faces a variety of problems, including changes in demand caused by the decline in the birthrate and aging of the population, the appreciation of the yen due to a combination of factors including the European debt crisis, recovery and reconstruction from the Great East Japan Earthquake and crisis at Tokyo Electric Power Company Fukushima Daiichi Nuclear Power Plant, and the ensuing power shortages. It is at such a pivotal time as this that small and medium enterprises (SMEs) must surmount the severe business conditions that confront them and exercise all their innate agility and innovativeness to lead the Japanese economy into the future. This White Paper examines what SME policies are needed in the future, analyzes the current situation among SMEs (including several forward-looking cases), and describes the key issues to be tackled in order for SMEs to overcome the challenges that they face. The White Paper first reviews developments among SMEs since the Great East Japan Earthquake and argues for the need to continue providing support to enable SMEs, with their strong community ties, to play a core role in the process of reconstruction from the earthquake and ensuing disasters. After describing numerous examples of enterprises that have leveraged appealing products and services to enter into overseas markets and revitalize their operations in Japan too by doing business overseas, attention is drawn to the need for support measures to mitigate the risks of overseas business expansion. An additional focus this year is on the human resources upon which SMEs depend. The potential of women’s startups and employment to generate fresh demand is analyzed, and the importance of developing skilled human resources in manufacturing and the contribution to be made by outside experts to SMEs’ management are also considered. The Small and Medium Enterprise Agency, Ministry of Economy, Trade and Industry will be rebuilding SME policy, and the “The Future of Japan Support Conference – Small Enterprises Change Japan” (the “Small Enterprises” Future Conference) has already been launched to assist in this process. We have sought the direct views of small businesses all over the country to help us seriously overhaul conventional forms of support for SMEs and develop new measures to strengthen SMEs’ and small enterprises’ dynamism and business capabilities. We hope that this White Paper will generate further feedback from those directly involved with SMEs. Based on the views and opinions, we will develop policies that allow all SMEs to do their dynamic best. Yukio Edano Minister of Economy, Trade and Industry June 2012 The 2012 White Paper on Small and Medium Enterprises in Japan consists of the following two reports submitted by the Government to the 180th Session of the Diet pursuant to Article 11 of the Small and Medium- sized Enterprise Basic Act (Act No. 154 of 1963): “Developments among Small and Medium Enterprises in Fiscal 2011” “Small and Medium Enterprise Policies in Fiscal 2012” Outline of the 2012 White Paper on Small and Medium Enterprises in Japan The first part of this report analyzes recent developments among small and medium enterprises (SMEs), and the second part analyzes the initiatives being pursued and challenges faced by SMEs as they bring their potential into play in business. The third part analyzes the business challenges that need to be overcome in order for SMEs to be able to fully realize their potential. Part I Developments among SMEs in fiscal 2011 • While the Japanese economy is recovering from its downturn in the wake of the Great East Japan Earthquake on March 11, 2011, the pace of recovery has weakened owing mainly to the appreciation of the yen and the world economic slowdown. • Among SMEs, business conditions picked up after the great earthquake but leveled off from early 2012 due to concerns over a number of factors, including the appreciation of the yen, soaring raw material and fuel prices, higher electricity rates, and the risk of tight power supply situation. Appropriate measures will therefore continue to be taken to assist SMEs while paying close attention to developments in the macroeconomic situation and among SMEs. Part II Realization of potential and roles of SMEs SMEs’ potential derives from their application, under changing social conditions, of business resources that would otherwise lie untapped due to obstacles of one kind or another. Particular strengths include their flexibly, technological and product development capabilities, and marketing strengths. This part analyzes how SMEs are realizing their potential by (1) playing a key role in assisting the process of reconstruction following the Great East Japan Earthquake, and (2) tapping into growth opportunities in Japan and overseas (enterprises that are expanding overseas and business activities of women). ● Reconstruction from the great earthquake and the role of SMEs • The Great East Japan Earthquake disrupted supply chains and depressed Japan’s mining and manufacturing production, confirming Japanese industry’s dependence on the Tohoku and northern Kanto regions. • With their strong community ties, SMEs have an important role to play in the reconstruction process, urban development, and regional revitalization. ● Business activities to generate and tap into demand (Use of operations in Japan to tap into demand overseas) • The trend toward overseas business expansion is growing among SMEs, too. Many enterprises have found that developing markets overseas by exploiting their technological capabilities, marketing strengths, after-sales service capabilities, and capacity to meet demand in their host markets has stimulated their operations in Japan as well. However, overseas business expansion
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