Japan unveils measures to support financing for large companies affected by pandemic

Pedestrians wearing protective masks amid the coronavirus (COVID-19) outbreak are heading to Tokyo, Japan, February 2, 2021. REUTERS / Kim Kyung-Hoon

The Japanese government on Tuesday decided to adopt measures to help medium and large businesses increase their equity capital, said Finance Minister Taro Aso, in a move to support restaurants and accommodation businesses hit hard by coronavirus restrictions.

The government’s response to business financing during the pandemic has so far mainly targeted small businesses with measures such as providing interest-free and unsecured loans.

However, the protracted pandemic has increased the need not only to meet demand for short-term financing, but also to provide capital to medium and large enterprises to strengthen their financial bases, government officials said.

The government also decided on Tuesday to spend about 2.2 trillion yen ($ 20.21 billion) in emergency coronavirus reserves set aside in this fiscal year budget to help low-income families with children. and supporting businesses that are cutting back hours in accordance with pandemic restrictions. .

“By applying these measures regularly, we will ensure that we support catering and accommodation companies that hire large numbers of non-regular workers,” such as part-time workers and contract workers, Aso told reporters after a cabinet meeting.

The new loan program will allow government-backed lenders, such as the Development Bank of Japan and the Shoko Chukin Bank, to provide subordinated loans and preferred shares to companies in the restaurant, foodservice, food and beverage industries. accommodation and others.

This decision marks a departure from the current practice, which does not allow government-affiliated lenders to provide such financing without coordinating with private lenders.

Under the new program, government-backed lenders are allowed to provide subordinated loans to medium and large enterprises at interest rates of around 1% for the first three years, up from 5% or more currently available in many cases.

Flexible loans from state-backed lenders are expected to help businesses strengthen their financial footing, making it easier for them to borrow money from banks and avoid bankruptcies.

The latest move underscores the concern of policymakers that a prolonged pandemic and a delay in economic recovery could trigger bankruptcies among medium and large companies as well as small.

COVID-related bankruptcies totaled 1,150 as of March 12, with 186 bars and restaurants, and 81 hotels and inns, according to Teikoku Databank, a private credit research firm.

“What is important is doing everything in your power to prevent the spread of the virus and support jobs and livelihoods in the face of the coronavirus,” Aso said. “It is true that the current public finances are deteriorating … but we are not planning to raise taxes now.”

(1 USD = 108.8400 yen)

Our standards: Thomson Reuters Trust Principles.

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