Key Factors of 2011 White Paper on Small and Medium Enterprises In

Provisional Key Factors of 2011 White Paper on Small and Medium Enterprises in Japan July, 2011 Trends among SMEs in 2010 SME Agency The business conditions and production of SMEs were beginning to improve, but have significantly worsened due to the impact of the Great East Japan Earthquake.

The business conditions generally tended to improve, but have significantly worsened in March 2011 especially in East Japan. The production generally tended to improve, but has decreased in March 2011; the range of the decrease was the largest-ever.

(Year-to-year basis: DI) Business condition DI of SMEs (Seasonal adjustment figure: Manufacturing production index by industry and by size of enterprise ▲ 2005=100) 30.0 160 Industry for electronic parts and All over Japan Steel ▲ 40.0 140 industry Manufacturing Transport Chemical Kanto & industry General machinery Food and cigarette Electric machine ▲ 50.0 Koshinetsu 120

Hokkaido & 100 ▲ 60.0 Tohoku 80 ▲ 70.0 3 4 5 6 7 8 9 10 11 12 1 2 3 4 60 10 11 Year/Month 40 Thick-lines represent SMEs and thin and dotted lines represent large Enterprises. Sources: “Survey of Monthly Business Conditions of Small and Medium Enterprises” by National Federation of Small Business Associations Sources: METI, “Indices of Industrial Production” and “Current Production Statistics Survey”; and SME Agency, “Manufacturing Production Indices by Size of Enterprises” Notes:1. Survey was conducted by the information liaison members appointed at the Prefectural Central Federations (About 2,700 executives and Notes:1. The term is from January 2008 to April 2011. employees of SME associations (such as cooperatives and commercial associations) are assigned to the survey). 2. The figures for large enterprises are calculated from “Indices of Industrial Production”, “Current Production Statistics Survey” and “Manufacturing Production Indices by 2. The business condition DI is a figure obtained by subtracting the percentage of companies that answered “business conditions have worsened” Size of Enterprises”. compared to the same month of the previous year from the percentage of companies that answered “business conditions have improved”.

Impact of the Great East Japan Earthquake on SMEs

In the Great East Japan Earthquake, various phenomena such as earthquakes, tsunami, and nuclear power plant accidents occurred, which became intertwined in a complex manner and caused wide ranging and enormous impacts on SMEs.

There are approximately 80,000 businesses in the tsunami-affected areas, 740,000 businesses in the earthquake-affected area, 8,000 businesses in the evacuation zones of Fukushima Daiichi Nuclear Power （１）Conditions of disaster-affected member companies grasped by the chambers Plant, and 1.45 million businesses in the prefectures covered by Tokyo Electric Power Company. of commerce and industry in Aomori, Iwate, Miyagi, and Fukushima.

Number of Companies, Values of Shipments, and Commodity Sales As for the damages of buildings and houses, while total destructions account for approximately 50% in the coastal areas, partial damages account for approximately 80% in the 1.Tsunami-affected Areas １ 2. Earthquake-affected Areas 2 inland areas, showing that greater damages occurred in the coastal areas affected by tsunami. Number of Source: “2009 Economic Census for Business Frame” by the Ministry of Internal Affairs Companies 75,098 Number of and Communication; “2008 Census of Manufacturers” and “2007 Census of Commerce” by (in 2009) Companies 742,462 the Ministry of Economy, Trade, and Industry (in 2009) Notes:1. Among municipalities to which the Disaster Relief Act was applied due to the Values of Conditions of Affected Member Companies 4.4 trillion Values of Great East Japan Earthquake (as of March 24, 2001), the data of 39 municipalities Shipments 35.6 trillion yen Shipments in Aomori, Iwate, Miyagi, and Fukushima that were inundated by tsunami (in 2008) yen Percentages in the number of affected companies and grasped companies (%) (in 2008) according to the “report on the area (approximate value) inundated by tsunami (the Number of Number of Commodity Sales 7.4 trillion Commodity Sales 206.5 trillion 5th report)” published by the Geographic Survey Institute on April 18 were Member Companies (in 2007) yen Total Half Partial (in 2007) yen summarized. As for Sendai City, only the data of Miyagino Ward, Wakabayashi Companies Grasped collapse of collapse of collapse of Harm of Indirect Ward, and Taihaku Ward were summarized. No harm 3. Evacuation Zones of Nuclear 2.Among municipalities to which the Disaster Relief Act was applied due to the Great houses and houses and houses and equipment harm East Japan Earthquake (as of March 24, 2001), the data of municipalities excluding buildings buildings buildings Power Plant Accidents 3 39 municipalities in Aomori, Iwate, Miyagi, and Fukushima that were inundated by Number of 4. Prefectures covered by Tokyo tsunami according to the “report on the area (approximate value) inundated by Coastal 3,344 783 1,763 175 77 0 7,503 18,560 6,142 Companies (in 2009) Electric Power Company 4 tsunami (the 5th report)” published by the Geographic Survey Institute on April 18 as Areas （54.4%）（12.7%）（28.7%）（2.8%）（1.3%）（0.0%） well as the data of Aoba Ward and Izumi Ward of Sendai City were summarized. Number of Values of Shipments 0.3 trillion 3.Data of all areas of Tamura City, Minamisoma City, Kawamata Town, Hirono Town, 191 205 6,256 468 446 0 Companies 1,454,598 Inland Areas 48,596 7,566 (in 2008) yen Naraha Town, Tomioka Town, Kawauchimura, Okuma Town, Futaba Town, Namie （2.5%）（2.7%）（82.7%）（6.2%）（5.9%）（0.0%） (in 2009) Town, Katsuraomura, and Iidatemura were summarized as municipalities including Commodity Sales 0.3 trillion Total 67,156 13,708 3,535 988 8,019 643 523 0 Values of Shipments 111.6 trillion the evacuation zones of Fukushima Daiichi Nuclear Power Plant. (in 2007) yen (in 2008) yen 4. Data on Ibaraki, Tochigi, Gunma, Saitama, Chiba, Tokyo, Kanagawa, Yamanashi and Shizuoka were summarized. Commodity Sales 262.9 trillion Source: Created based on the reports from the Central Federation of Societies of Commerce and Industry (in 2007) yen Notes:1. Figures reported from the chambers of commerce and industry before May 13, 2011 were summarized. 2. It should be noted that the area of a chamber of commerce and industry is the area of the municipality. 3.Few replies were received from the coastal areas of Fukushima, due to the effect of the nuclear power plant accidents. 1 Impact of the Great East Japan Earthquake on SMEs

（２）Earthquake-Impacts SMEs （４） Impacts of Lowered Consumption Mind due to Earthquake Many SMEs were affected by shortages of dealing items and price increase as well as Decreases in demands in retail businesses and service industries affected the whole country. lowered consumption mind

Impacts of Great East Japan Earthquake Impacts of Earthquake on Demands for Small and Medium-Sized Businesses Affected at present Own company was affected by earthquake 1.1 Likely to be affected in the future Direct impacts Demand decreased (including forecast) Business partners were affected by earthquake 8.0 2.2 Indirect impacts Demand slightly decreased (including forecast) Planned power outage 8.0 0.8 No effect Demand slightly increased (including forecast) Distribution stagnation 6.7 0.1 (Types of Demand increased (including forecast) Not sure Impact on Industries) Troubles in communications and information … 0.5 （Region） infrastructure All 41.9 20.4 10.5 9.2 3.1 14.9 and distribution All 36.0 21.2 7.5 14.9 5.0 15.4 Shortages of dealing items and price increase 35.8 10.0 Hokkaido 45.0 19.8 11.7 6.3 1.8 15.3 Tohoku 49.3 10.7 8.0 12.0 9.3 10.7 Fuel shortage and price increase 6.0 0.4 Retailing 43.9 20.8 9.8 8.93.6 13.1 North Kanto 46.6 15.9 5.7 12.5 4.5 14.8 Impact on behaviors Enhanced voluntary restraint and economy … 24.4 5.2 and mind of business Service industries 41.4 20.3 10.7 9.33.0 15.4 South Kanto 48.1 21.4 8.8 7.6 3.1 11.0 partners and Effect by harmful rumors 1.4 0.2 Hokuriku 29.3 20.7 10.3 20.7 5.2 13.8 consumers Wholesalers 38.6 22.1 7.0 14.3 4.9 13.0 Special demand by earthquake 3.9 1.2 Tokai 41.8 21.3 9.9 10.6 2.1 14.2 Other impacts Kinki 31.9 23.8 9.5 10.5 3.3 21.0 Others 3.42.2 Manufacturers 33.6 22.6 5.8 17.2 5.8 15.0 Chugoku 39.4 25.5 9.6 9.6 0.0 16.0 0 5 10 15 20 25 30 35 40 45 50 Transport and Shikoku 27.3 11.4 20.5 11.4 2.3 27.3 35.0 17.5 5.0 21.5 5.6 15.4 warehouse (%) Kyushu 32.4 17.6 21.1 5.6 2.1 21.1 Source: “Japanese small businesses monthly trend survey” by Japan Finance Corporation (Surveyed in April 2011) 0% 100% Notes: 1. Percentages shown were calculated by using the total of the companies responded as “affected at present” or 0% 100% “likely to be affected in the future” as the denominator. 2. As multiple replies were obtained, the total does not necessarily come to 100%. Source: „Attitude survey on impacts of the Earthquake and reconstruction support‟ by Teikoku Databank, Ltd. (Surveyed in March 2011） 3. This is the results of the survey conducted on 1,395 companies that Japan Finance Corporation deals with Notes :1.Count the number of SMEs only. (excluding Iwate, Miyagi, Fukushima and Ibaraki). 2.Grapf on the right side shows only retailing industry and service industry.

（５）Impacts of Nuclear Power Plant Accidents （３）Impacts through Supply Chain

The values of shipments in the affected areas were large, and the difficulty in trading with In the evacuation zones of Fukushima Daiichi Nuclear Power Plant, there are not only agriculture, forestry, and companies supplying dispensable items in industries and the lowered consumption mind affected fisheries businesses but also many SMEs in construction, manufacturing, and wholesale and retail trade; retail businesses and service industries across the country. they have no choice but to evacuate.

Top 5 Items with Highest Values of Shipments in Affected Areas Percentages of Workers by Industry in the Evacuation Zones of the Fukushima Daiichi Nuclear Power Plant* Agriculture, forestry and fisheries Construction Manufacturing Values of Shipments (in 10 Percentage billion yen) Wholesale and retail trade Electricity, gas, heat supply and water Others Ranking Item Name Distribution Disaster-Hit Whole Country (%) Area Evacuation zones of Fukushima Daiichi Nuclear Power Plant 12.4 14.8 20.6 13.7 2.1 36.3 1 Automobile parts and accessories 67 2,654 2.5

2 Other electronic parts, devices, electronic circuits 33 405 8.1 Fukushima 9.2 10.1 20.5 16.3 0.7 43.2 3 Integrated circuits 31 431 7.1

4 Foreign paper and machine-made Japanese paper 30 208 14.4 All 4.8 8.8 17.3 17.9 0.5 50.7

5 Automobiles (including two-wheel automobiles) 27 969 2.8 0% 100% All Items 1,165 30,525 3.8 Source: “2005 Population Census” by Ministry of Internal Affairs and Communications Source: Recompiled from METI, “2008 Census of Manufacturers” Notes: The industry classification is in accordance with the March 2002 revision. “Others” shows the total of mining, information and Notes:1. For the disaster-hit areas, the data of municipalities to which the Disaster Relief Act was applied in Aomori, Iwate, communications, transport, finance and insurance, real estate, accommodations, eating and drinking services, medical, health care and welfare, Miyagi, and Fukushima (as of March 24, 2011) were summarized. education and learning support, compound services, services (services not classified elsewhere), government, and industries unable to classify as 2. The data were summarized by item based on the manufacturing item number of the commodity classification table in the per Japan Standardized Industrial Classification. Census of Manufacturers. * The data of all areas of Tamura City, Minamisoma City, Kawamata Town, Hirono Town, Naraha Town, Tomioka Town, Kawauchimura, Okuma Town, Futaba Town, Namie Town, Katsuraomura, and Iidatemura were summarized as municipalities including the evacuation zones of In response to the imoact of tsunami and earthquakes, financial support by financing and guarantee and Fukushima Daiichi Nuclear Power Plant. employment support by subsidies for employment adjustment and unemployment insurance have been substantially enhanced, while support and assistance are being provided for the maintenance of temporary While providing special financial support, business support, and support for damages by harmful rumors, stores and temporary factories, for corporate groups playing a central role in regional economy and for provisional payment compensations for SMEs affected by the nuclear power plant accidents have started. damages by harmful rumors, in response to demands to restart businesses. 2 SMEs support the economic society

1. SMEs are important foundation of the industry and people‟s living SMEs support and lead the economy and people‟s living (From “Charter of Small and Medium Enterprises”). On the occasion of the Great East Japan Earthquake, the importance of SMEs has been reaffirmed; SMEs have been supporting the industrial supply chains of Japan and the living of local residents. (1) SMEs support the industry (3) SMEs supporting daily life In the industry of transport machineries and appliances, large enterprises SMEs play important roles in supply chains regardless of business affiliation and About 30% of shopping malls and consumers recognize that shopping malls make a are supported by many SMEs manufacturing parts, etc become indispensable to the partner companies. In the occasion of the earthquake contribution by providing products and services indispensable for daily life. Stores disaster, supply chains were affected due to production shutdown of core SMEs. restarted quickly in the earthquake-affected area to support the daily needs of Transaction structure of the industry of residents. Number of Status of business affiliation (small and medium manufacturers) transport machineries and appliances purchases Contribution by the Shopping Mall to the Economy and Society Affiliated (%) Mitsubishi 0% 50% Not affiliated 100% 250 31.9 商店街消費者 Mitsubishi Motors 35 29.9 Shopping mall Consumers Heavy Industries Industry of transport machineries and 39.7 60.3 30( Honda Motor appliances 25 22.8 200 20.0 80.0 Mitsubishi Fuso Suzuki Motor Chemical industry 20 16.6 15.8 Truck and Bus Food manufacturing industry 15.3 82.8 1.9 15 12.9 Fuji Heavy 10.2 9.9 9.1 Manufacturing industry of production 8.3 Industries 28.4 59.3 12.3 10 6.0 150 machineries and appliances 3.8 3.9 Nissan Motor 2.0 2.5 2.7 3.12.9 5 1.9 1.7 0.71.4

Industry of electronic parts, devices and 8.3 91.7

Yamaha Motor circuits Isuzu Motors 生サを産サを企サ代特製地地地取地納そ 100 Affiliated before, but not now 生サ活ーもサ業ーも業ー表産品域域域引域税のにた活にた品やのの先へ他

ビビビの district ーーにす Others 不らに不ら等サ住人へイ企の Toyota Motor Own products, services and technologies (Small and medium manufacturers) ビスビス付スる activities

可すゆ可す、ー材のベ業観 the district the

Taxpaying Affiliated Not Affiliated スのスの加の製地民欠製と欠製ビ、の参ンの光 (%) の提の提価販品域 50 100 80 60 40 20 0 0 20 40 60 80 100 な品りな品ス企雇画ト招客提供提供値売やを specialties local 業供製、供製、の用や致やへ品品販活の、、売動

living daily in relaxing

0 You frequently receive repeat district to the enterprises

indispensable for daily life daily for indispensable

68.1 orders from a partner company 78.2 industriesfor indispensable

Selling products and services services and products Selling

Inviting tourists and customer customer andtourists Inviting

residents and enterprises in the the in enterprises and residents Employing human resources in resources human Employing

Large companies to services and products Selling

Participating in local events and events local in Participating

Providing products and services services and products Providing

representing the district such as such district the representing Providing products and services services and products Providing A partner company has said “only your services and products Providing

SMEs enterprises at values additional for 62.3 company can do this” 54.7 for services and products Providing Source: Recompiled from Tokyo Shoko Research, Ltd. “TSR Enterprise Correlation Files (2010)”. You have involved in a partner company‟s Notes:1. Lines represent transactions between corporations, large circles represent large enterprises and Reference: Japan Shopping Mall Survey (November 2010) by Mitsubishi Research Institute, Inc. commissioned development from its planning and designing small circles represent SMEs. The colors of the circles indicate main business category of each 44.3 40.7 by SME Agency phases company under the industrial small classification database. Notes: 1.The scores were calculated by giving 3 to the most suitable alternative, 2 to the second most suitable 2. The transactions displayed in this chart are extracted from transactions between companies in the 35.4 You have received a letter of appreciation, 24.7 one and 1 to the third one. same business category and do not represent all the data included in the Corporate Correlation File. etc. from a partner company 2.Shopping malls answered about themselves and consumers answered about shopping malls in general. 3. The Corporate Correlation File was created on the basis of the data as of the date of survey and 22.7 A partner company has said “do not sell 27.2 inquiry by Tokyo Shoko Research and may be different from the current conditions.) (products, etc.) to other companies” Shopping malls have faced severe problems after the earthquake. It is Vacant space and production equipments of plant were provided free of charge to the Source: Mitsubishi20.8 Research Institute, Inc “Questionnaire to support the industry and people‟s18.6 living” (November necessary to take proper approaches while appropriately understanding the business partner, which was in charge of the final process. As a result, the business partner 2010) commissioned by SME Agency needs of customers such as increasing the number of appealing stores. was saved from the crisis of business closure and was able to manufacture parts on its own as Notes:1. The top 56.1 answers were counted. 2.6 normal. (Ishinomaki City, Miyagi Prefecture: Horio Seisakusho) 2. Totals do not necessarily sum to 100 due to multiple responses. Measures to Solve Problems of Shopping Malls 2.4 (%) 2.2 80 Shopping商店街 mall 73.0消費者Consumers 70 62.3 (2) Enterprises and enterprise groups that support the economy of the earthquake-affected area 57.0 58.0 2.4 4.8 60 48.9 In the urban employment area of Ishinomaki, enterprise groups in marine product processing and food, civil engineering and 46.0 46.3 50 44.0 42.0 construction, as well as fishery and shipbuilding industries represent about 50 to 60% of the total number of enterprises, 33.4 36.3 33.7 0.0 1.6 40 30.9 28.7 29.3 36.4 30 26.6 22.7 employees and revenues. These enterprise groups and enterprises at the core of such groups are playing important roles. 17.6 18.1 21.8 20 10.0 Number of Enterprises, Employees and Sales Amounts of Major Enterprise Groups in Ishinomaki Urban Employment Area 10 3.0 2.7

Reference: Prepared on the basis of “SPECIA” by

0 Teikoku Databank, Ltd. in cooperation with 地客地イ交集魅店商商を地そ域層域ン通客力舗店店含方の Mr. Ichiro Sakata, professor at Policy 住に独タの核的、街街む公他 Ratio to the number 広 stores 商民応自ー利のな心内外商者共 Others Sales amount of Ratio to the sales Alternatives Research Institute, University of の域店のじのにネ便誘店地部部店と団 Enterprises Ratio to all Employees working of employees り対把のへ街 Classification of these enterprises in amount of these Tokyo and Mr. Junichiro Mori, assistant 顧た商よッ性致 customers 舗の成の保の街の体込応握販のの in the area enterprises for these enterprises working for these Core enterprises 客顧品るトのの向担担活連やみと売 district the to 販快 Enterprise Group the area (million enterprises in the professor の客、・改充上いい動携外 (companies) in the area in the area (persons) enterprises in the サ売適維ニ通善実手手の部 yen) area Notes: 1.“Ishinomaki urban employment area” covers ー性 area 持ー販のの強参 resident customers resident ビ、 Ishinomaki City, Higashi- Matsushima City and 、ズ等育確化加取ス居 Marine product Ishinomaki Fish Market, Taiko Corporation, Onagawa Town. processing and 162 21.7% 3,641 21.6% 312,946 41.3% Onagawa Fish Market, Shichiseisha,

2.Total of transactions where enterprises located in characteristics customers‟ food Miyagi Fisheries Cooperative, etc. order mail and Internet the

Ishinomaki urban employment area are suppliers. malls shopping and stores of

Public works, Wako Industrial Corporation, mall the in leaders Developing

3.This analysis has some restrictions: transaction to gather facility core a Inviting

Civil engineering local increasing and Maintaining

Improving transport convenience transport Improving appropriate measures considering considering measures appropriate 179 23.9% 3,773 22.4% 83,993 11.1% Shinto Sogyo, Maruhon Gumi Corporation, local with collaboration including

scale (transaction amounts) cannot be reflected, activities mall shopping Enhanced

government or outside participants outside or government

Increasing the number of appealing of number the Increasing Developing leaders outside the mall the outside leaders Developing and construction taking and needs the Understanding Maruyama Shoji, etc. coziness and comfort the Improving offices having headquarters outside of peculiar services and products Selling Fishery and Yamanishi Corporation, Morihira Shoten, Ishinomaki urban employment area are excluded, via productsof range wide a for Selling 60 8.0% 1,318 7.8% 58,536 7.7% shipbuilding Miyagi Yanmar Co., Ltd., etc. and so on. Reference: Japan Shopping Mall Survey (November 2010) by Mitsubishi Research Institute, Inc. commissioned by SME Agency. Total 401 53.6% 8,732 51.9% 455,475 60.2% Notes:1.Shopping malls answered about themselves and consumers answered about shopping Grant total 748 100.0% 16,826 100.0% 756,985 100.0% malls in general. 2. Totals do not necessarily sum to 100 due to multiple responses. 3 SMEs supporting the economic society

2. Protection of Technology and Employment of SMEs

As structural issues such as shrinking domestic demand and intensified global competition have become severer since the Great East Japan Earthquake, some SMEs cannot have a positive outlook for the future. It is necessary to take appropriate measures. (1) Succession of business (3) Relationship banking SMEs and financial institutions mutually have mismatched expectations between them. In addition to the enhancement and growth of existing It is difficult to find purchasers or successors of businesses. business, successors tend to make advances to new fields. Consultation Issues to Which Importance Is Attached Purpose to Take over the Business (%) Problem in Relation to Business Succession (%) 35 (%) 32.4 Consultation issues to which financial 60 51.0 Consultation中小企業が求めている相談項目 issues needed by SMEs 金融機関が重視している相談項目 48.5 30 institutions place importance 50 25 40 35.7 18.8 36.0 40 35 32.0 20 15.4 15.0 29.7 30 26.2 30 21.9 20.4 15 9.1 25 20 10 4.5 6.6 2.6 20 17.7 17.4 10 5 2.2 13.4

15 10.6

0 8.1

10 見情事相専明企担提現そ特既既新他魅許事 3.3 3.0 2.8 field つ報業談門確業保供在のに 5

存存事社力認業 Others

け漏引料知なののしの他な 0

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business company

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business field business のるのぎい手がい分産産除い営

の大で野済経の commission or 規備業外営の

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Others Enlargement of of Enlargement

scale in existing existing in scale 継

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強 business existing のへ営取

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manager personally manager Lack of specialized specialized of Lack

succession

business succession business Difficulty in findingin Difficulty

難れ関料いが properties individual 個難保個す野資継開画

guarantee or security security or guarantee

preparation Nothing in particularin Nothing

化規の資得 to relation in leakage

successor of businessof successor

offered by current by the offered Difficulty in releasing releasing in Difficulty 先 development るしがすが難人し証人るへにぎにの模進源を談相いある高しのいやが相の関に関 onConsultation 作

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from properties corporate of 談 separation clear in Difficulty 談進す関す成

出るするに

in plants and equipment and plants in Consultation on on business Consultation Reference:“Actual Status Survey on Business Succession of Small and Reference: Survey on Business Succession (December 2009) by Mitsubishi Research Institute に相る on overseas Consultation 相関

Medium Enterprises” (November 2010) by the Japan Small Business commissioned by SME Agency 関 on investment Consultation 談相談す Consultation on advancing to to on advancing Consultation Research Institute Notes: 1.Total of the SMEs for which the manager answered that he/she would like to have Reference: Survey on Actual Status of Business Environment (November 2010) by SME Agency Note: Totals do not necessarily sum to 100 due to multiple responses. his/her business succeeded by other company after his/her retirement as the idea for Survey on Financing for Small and Medium Enterprises (November 2010) by Mitsubishi UFJ Research and his/her business after retirement Consulting Co., Ltd. commissioned by SME Agency 2.The scores were calculated by giving 3 to the most suitable alternative, 2 to the second Note: The scores were calculated by giving 5 to the most suitable alternative, 4 to the second most suitable one, 3 to the most suitable one and 1 to the third one. third one, 2 to the fourth one and 1 to the fifth one. (2) Business rehabilitation As a result of business rehabilitation, employment is Lack of Eagerness toward Rehabilitation Is the Greatest Problem. Financial institutions answered that they could not obtain necessary information about SMEs. maintained and customer satisfaction can be realized. Contents Achieved by Business Realization Factors Obstructing Continuous Support after Problems in Understanding Credit Risk of SMEs (%) Start of Rehabilitation Support 66.1 70 62.0 (%) (%) 59.3 100 88.6 60 54.5 90 84.5 90 52.4 80 80 50 70 58.9 70 60.7 35.2 60 53.7 60 40 50 44.6 41.3 40.8 37.5 50 34.9 30 40 40 20.3 19.5 30 21.1 20.1 15.4 15.2 30 20 12.0 20 8.5 20 9.3 6.9 4.4 3.9 10 6.1 10 2.4 10 3.3 1.0

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provision Others の足利 profits 技プ利ウ起の会付付頼度右資左意 district the 者

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な書いたい難報 to Vulnerabilitymoral 困のめが係にる姿

Difficulty in obtainingin Difficulty

cooperation from other other from cooperation Difficulty in borrowing borrowing in Difficulty

献､ information qualitative

維 organizations antisocial Pursuit of company‟s company‟s of Pursuit 対ウ力

technology and skills and technology 難が

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to improve management improve to いを難るが Maintaining excellent excellent Maintaining

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with substantialmanagerwith

Contribution to group to group Contribution cost required for detailed detailed for required cost

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Dependence upon external external upon Dependence Small amount of disclosed disclosed of amount Small

Insufficient support know support Insufficient はのに

Large weight manager‟sof Large

Lack of timely timely of information Lack

parties other than financial than other parties

Difficulty in understandingin Difficulty

Dependence upon the main the upon Dependence

Little opportunityLittle contactto

from financial institutions in institutionsfinancial from foreign as such environment

resulting in unavailability of of unavailability in resulting company the in examination Manager‟s lack of eagerness eagerness of lack Manager‟s

auditorby external checking

bank‟s attitude toward support toward attitude bank‟s

exchange and price of resources of price and exchange

Concern about relationship with with relationship about Concern

subcontractor or parent company parentor subcontractor

Lack of external rating institutionrating external of Lack

Dependence upon results of originalof resultsupon Dependence

Unpayable from the manager‟s individualassets themanager‟s from

Reference: Survey on Rehabilitation of Small and Medium Enterprises (November and technology evaluating in Difficulty Reference: Survey on Financing for Small and Medium Enterprises (November 2010) by assets corporate inseparatingDifficulty 2010) by Mitsubishi UFJ Research and Consulting Co., Ltd. Mitsubishi UFJ Research and Consulting Co., Ltd. commissioned by SME commissioned by SME Agency Agency Reference: Survey on Financing for Small and Medium Enterprises (November 2010) by Mitsubishi UFJ Notes: 1.Total of the SMEs that have applied for civil rehabilitation Note: Totals do not necessarily sum to 100 due to multiple responses. Research and Consulting Co., Ltd. commissioned by SME Agency 2. Totals do not necessarily sum to 100 due to multiple responses. Note: Totals do not necessarily sum to 100 due to multiple responses. 4 SMEs Realizing Economic Growth Under the influence of the Great East Japan Earthquake, many SMEs were forced to go bankrupt or give up their business. Shrinking domestic demand, increasingly intensified global competition and other problems since the time before the earthquake have become more serious. Immediate reconstruction is urgently required, of course. For continuous growth of Japan‟s economy, however, it is essential to promote renewals of economy through new start or change of business so that SMEs will grow up with improving labor productivity and getting business chances from overseas. 1. Start and Change of Business to Renew Economic Activities Under the circumstances where many SMEs go bankrupt or give up business due to the influence of the Great East Japan Earthquake, start of new business and change of business are important elements from the viewpoint of economy renewal and employment creation.

Renewal is progressed by start and change of business in the Employment increases at new offices. Many entrepreneurs are at the age of 60 or higher. manufacturing industry. Employment Creation by New and Existing Offices Female entrepreneurs and those at the age of 60 or higher (Increase ratio, %) (2006 to 2009, by the unit of office) 29Age歳以下 of 29 30歳代 or lower Thirties Ratio of Offices That Have Started or Changed Business (Manufacturers) Education and Information and 5.6 40Forties歳代 50Fifties歳代 Complex service provision Male男性 Female女性 communications learning support (%) Real estate 60歳以上 or higher 100 Change to business 13.1 Restaurant and Service provision (%) (%) Change to business of accommodation (not included in other categories) 100 100 of different medium Finance and insurance 6.6 different minor Medical 28.8 90 classification from 90 90 classification from and 12.3 „88 to ‟07 12.0％ 32.3 26.9 80 „88 to „07 18.3％ welfare 80 39.8 80 23.7 Employment Number of Transportation Retailing 16.3 70 70 20.2 70 Change of 15.0 creation offices 15.2 No change of business Wholesale 11.4 60 60 Construction 14.7 6,180,000 4,408,050 60 business 36.3％ Existing 10.2 11.5 14.0 persons offices 50 50 Manufacturing 13.9 office 16.5 (62.4%) (91.5%) 50 40 40 37.1 11.0 11.1 67.7 Start of business Start of business 11.0 60.2 40 30 30 26.7 from „88 to „97 9.6 3,710,000 410,354 Start of 11.1 New persons offices 20 20 30 17.4％ 8.8 7.6 8.0 office business from 7.0 (37.6%) (8.5%) 4.5 4.7 5.9 4.9 10 23.7 „88 to „07 3.93.9 10 20 2.4 14.8 45.4％ Start of business 0 0 Ratio of Employees of Various Classifications Reference: Establishment and Enterprise Census by the Ministry of Internal Affairs and 19791979年 20072007年 19791979年 2007年 10 from „98 to ‟07 Working for All Offices at the Beginning of 28.0% Communications (MIC) , Recompiled from MIC, „Economic Census for Business FY 2006 (not in the primary sector of industry) Reference: recompiled from MIC, „Employment Status Survey‟ Frame by MIC (trial calculation by SME A) 0 Notes: 1. Horizontal axis shows the ratio of employees belonging to each classification among the employees in all offices (not in the primary sector of industry) at Note: Among the people who changed their jobs or newly started working in the past one (Year) 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 the beginning of FY 2006. The number of employees at the beginning of the FY was calculated from those of the existing and abolished offices. year, those who are working on his/her own at present (except for those doing piecework at home) are referred to as “entrepreneurs”. Source: Recompiled from METI, “Census of Manufactures” . 2. Since there are only a small number of employees in the mining industry and electricity, gas, heat supply and water supply industries, they are not indicated. Notes: 1. The ratio of offices that started business and the ratio of those that experienced 3. New offices include newly opened branches and factories and relocated offices. change of business (classification change) are given for each year since 1988. 4. The number of employees as of 2009 is used for new offices, and the difference in employment at the offices that can be linked with the 2006 2. “Classification change” here means the change of the business with the Establishment and Enterprise Census is used for existing offices. Since the existing offices are limited to those in the scope of Establishment and highest ratio of shipment amount. Enterprise Census, it is possible that employment increase by existing offices could be calculated smaller than the actual results. 3. Offices having at least four workers are subject to the survey. 5. Among 4,408,050 existing offices, 1,085,387 offices are contributing to employment increase. 2. Improvement of Labor Productivity (Increase of Additional Value) Many companies engaged in metal products or general machinery have changed the industrial classification. In addition to decrease of population and progress of aging society with fewer children, restraint of energy supply has been 第Classification3-1-49図製造業内の業種転換（Change within the Manufacturing1997～ Industry2007年） (1997 to 2007; Unit: Office) intensified after the earthquake. For continuous growth of Japan's economy under such circumstances, it is necessary to improve ～製造業内では、金属製品と一般機械器具間の業種転換、一般機械器具、金属製品から輸送用機械器具への業種転換、電気機械器具から一般機械器具、 The number of business the labor productivity of SMEs. 電子部品・デバイスへの業種転換が多い～ Iron & steel establishment20,000 in 1997 5,000→5,000 After the earthquake, the tendency to consider a modest While introduction of information technology, automation and energy saving have a quick 10,0001万 increase of sales caused by deflation, shrink of domestic effect, there is a tendency that it takes time to actually feel the effect of larger number of 217

253 market etc. as a problem may have become much stronger. customers, higher unit price per customer, ensuring and training of human resources etc. 20,000 365 Transportation equipment 2万 Problems To Be Solved For Improvement of Importance of Approaches for Labor Effect at the Enterprises Fabricated metal products 498 14,000→12,000 Labor Productivity of SMEs Productivity Improvement 44,000→33,000 Very important Important 1 to 2 years later 5 years later 100% 10 years ago 84.5 Not so important Not important 10 years later Effect is not actually felt 75.4 At present The number of business 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% establishment in 1997 → That in 2007 396 52.8 40.2 38.7 16.2 4.9 Larger number of customers 49.5 18.1 4.1 28.3 297 521 48.8 1,030 Electronic parts and devices 46.7 44.844.2 972 34.7 34.3 8,000 →8,000 32.5 33.6 48.1 14.6 3.6 Higher unit price per customer 47.7 16.2 4.3 31.8 21.5 22.4 20.5 31.1 48.8 13.5 6.5 Ensuring/training of human resources 55.4 17.1 3.3 24.2 5.2 1.0 1.1 505 204 General machinery & equipment 266 0% 24.5 46.4 21.9 7.2 Technology innovation 59.0 15.5 4.3 21.2 268

40,000→34,000

The number of business establishments 12.6 44.7 31.6 11.1 Information technology introduction 78.0 8.3 3.8 9.9

332 Information and communication electronics equipment Others

which have changed industrial classification 4,000 →2,000 200 512 14.4 35.5 34.7 15.4 Automation 75.0 10.3 4.3 10.4 Electrical machinery

400 consumers 11.5 43.1 34.9 10.5 Energy saving 71.2 6.41.9 20.5 reduction

17,000 →12,000 prices material

wage etc. wage

globalization

population

higher oil and raw raw andoil higher Diversified need of of need Diversified 資料：経済産業省「工業統計表」再編加工 to due increase Cost

yen, deflation etc. deflation yen, 24.4 49.5 18.5 7.6 Innovation of work processes 71.0 9.5 2.5 17.0

due to decrease of decrease to due caused by progress of progress by caused

Source:(注 Recompiled)1.1997年から from2007年までの間に存続した従業者数 METI, “Census of Manufactures”4人以上の事業所のうち、製造業内で中分類ベースで業種転換を行った事業所が対象。 competition Intensified

Difficulty in further cost cost further in Difficulty

due to higher minimum higher to due Sales decrease caused by by caused decrease Sales

2.ここでいう業種転換は、出荷額構成比の最も高い業種の転換をいう。

strong economy, sluggish Increase of personnel cost personnel of Increase Notes: 1. Among3.200事業所以上の業種転換を矢印で示している。 the offices existing from 1997 to 2007 with at least four employees, those that changed the medium industrial market of domestic Shrink classification within the manufacturing industry are subject to the survey. Source: Nomura Research Institute, Ltd “Survey on Productivity Improvement” commissioned by SME 2. “Classification change” here means the change of the business with the highest ratio of shipment amount. Source: Nomura Research Institute, Ltd “Survey on Productivity Agency(November 2010). 3. Industrial classification changes of 200 or more offices are expressed as arrows Improvement” commissioned by SME Agency (November 2010.) Note: “Effect at the Enterprises” shows the results at the enterprises that have implemented improvement 5 Note: Totals do not necessarily sum to 100 due to multiple responses approaches only. SMEs Realizing Economic Growth

3. Globalization of SMEs

In addition to further shrinking of domestic demand and increasingly intensified global competition under the influence of the Great East Japan Earthquake, export declines, foreign tourists visiting Japan decrease, and some foreign and foreign-affiliated companies are going out of Japan. We are in quite severe conditions continuously. Further, it is difficult to prospect a large increase of domestic demand in mid-term and long-term. forecasts. It is necessary for SMEs in Japan to get business chances from overseas countries and regions expected to grow in the future.

The companies recognizing that they could ensure a certain share in the local market The number of exporting companies has increased to 5,606 by 2008. It tend to answer that they have strength in customer relationship and brand power in tended to increase for all industrial classifications. addition to advanced functions and high performance of their products.

Number of Exporters by Industrial Classification （％） Comparison of Strength of Companies (Asian Market) 90 Companies ensuring a certain share Those not ensuring a certain share (Small and Medium Enterprises) 80.1 80 72.5 （companies） Daily-living related companies Basic material companies Processing/assembly companies 70 6,000 5,606 Increase ratio 60 5,348 from 2001 46.0 4,967 50 4,838 5,000 4,603 4,702 40 36.3 36.0 4,334 Processing/ 29.9 30 26.0 24.4 24.4 assembly 23.0 2,923 18.6 18.617.9 16.6 4,000 3,568 2,809 20 13.4 14.5 13.6 14.1 companies 12.1 12.9 11.6 10.8 9.4 8.5 2,584 2,707 5.85.8 2,428 2,522 30.6％ 10 3.5 2,238 0.81.8 0.8

3,000 0

Advanced functionsand high Customer relationship Durability; difficulttobreak Large effect Japanese culture and tradition Price competitiveness High Feeling of highclass products Others

Scarcity Short delivery Continuity of effect Attached services Notsure Basic Brand power 1,929

material - mix low companies 2,000 performance

1,723 1,832 27.3％ - 1,439 1,480 1,506 1,546 1,550 volume production 1,000 1,167 Daily-living related 816 851 657 472 695 674 708 710 companies 0 29.5％ 01 02 03 04 05 06 07 08 （year） Reference: Mitsubishi UFJ Research and Consulting Co., Ltd.“Survey on Opportunity Taking from Growth in Source: Recompiled from METI, “Census of Manufactures” Overseas Market” commissioned by SME Agency (November 2010) Note) 1. "Processing/assembly companies” here means those classified to Manufacture of general-purpose machinery, Manufacture of Notes: 1. Total of the SMEs that answered about their share ensuring situations in the local market only. production machinery, Manufacture of business oriented machinery, Electronic parts, devices and electronic circuits, Manufacture of electrical 2. “Companies ensuring a certain share” here means the SMEs which answered that they ensured machinery, equipment and supplies, Manufacture of information and communication electronics equipment and Manufacture of transportation a certain market share. equipment under the Japan Standard Industrial Classification. 3. “Those not ensuring a certain share” here means the SMEs which answered that they were 2. “Basic material companies” here means those classified to Manufacture of lumber and wood products, Manufacture of chemical and allied competing with others in the market, they did not ensure a certain market share or they were not sure. products, Manufacture of pulp, paper and paper products, Manufacture of petroleum and coal products, Manufacture of plastic products, 4. Totals do not necessarily sum to 100 due to multiple responses. Manufacture of rubber products, Manufacture of ceramic, stone and clay products, Manufacture of iron and steel, Manufacture of non-ferrous metals and products and Manufacture of fabricated metal products under the Japan Standard Industrial Classification. SMEs also expect merits brought by progress of economic collaboration with overseas regions. Merits for Your Company Assumed by Progress of Economic While it is concerned that tourists would decrease under the influence of the earthquake, small and Collaboration with Overseas Regions (%) medium hotels and inns that accept foreign tourists tend to have higher bed occupancy. Those selling goods and providing services to overseas market 70 65.2 Those not selling goods or providing services to overseas market Comparison of Bed Occupancy by Acceptance of Foreign Tourists 60 46.8 Small and medium hotels/inns accepting foreign tourists 50 42.0 Large hotels/inns accepting foreign tourists 40 25.9 (%) Small and medium hotels/inns not accepting foreign tourists 30 21.2 20.8 Large hotels/inns not accepting foreign tourists 16.0 20 13.3 12.4 10.6 10.3 11.3 60.0 9.1 8.7 6.2 6.0 57.5 55.6 55.3 57.4 10 4.0 3.7 2.2 4.5

51.1 49.6 52.6 51.7 50.4 49.8 52.8 0

50.0 53.4 50.0 49.3 53.0 52.1 49.9 50.2 50.1 47.0 44.8 47.8 48.1 48.0 47.6 47.4 46.5 44.3 45.6 43.9 41.5 45.4 45.4 40.0 40.3 Others 37.8 37.8 36.2 34.7 35.5 34.6 34.4 33.3 34.6 34.7 33.7 34.6 34.6 30.2 32.3 30.0

30.0 no merit is There

28.3 28.2 29.3 28.9 29.1 27.9 27.6 28.1 27.7 27.9

channel

procedures

resources quality foreign human foreign quality

20.0 - foreign regions foreign

Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ overseas from

07 08 09 10 trade smoother and tariffs

Cost reduction by abolishing of of by abolishing reduction Cost local corporations to to Japan corporations local （） and company of Continuance

Quarter & Year overseas from flowing funds to

Promotion of direct investment in investment direct of Promotion

Company growth andincreasedgrowth Company

Exploitation of new overseas sales sales overseas of new Exploitation

Use of of high Use

maintenance of employment thanks employment of maintenance

increased direct investment in Japanin investment direct increased

Increase of customers resulting from from resulting customers of Increase Increased return of funds obtained at obtained fundsof return Increased Source: Recompiled from Japan Tourism Agency , „Survey of Accommodation and Travel Statistics„ thanksfundstoflowing employment Notes: 1. Hotels/inns with 10 to 99 employees are considered as small and medium hotels/inns, and those with 100 or more employees are considered as large hotels/inns. Source: Mitsubishi UFJ Research and Consulting Co., Ltd, “Survey on Opportunity Taking from Growth in Overseas 2. “Employees” here means all people working at the hotels/inns (including temporary workers as well as those dispatched Market” commissioned by SME Agency (November 2010) or transferred from other companies) Notes: 1. Total of small and medium enterprises only. 3. Bed occupancy = (Total number of tourists stayed overnight / Total capacity (the number of people that can be 2. Totals do not necessarily sum to 100 due to multiple responses. accommodated in the hotel/inn * period) * 100 6