Japan’s government on Tuesday unveiled measures to help midsize and large companies boost capital funds, officials have said, a step aimed at backing mainly restaurants and lodging businesses hit hard by coronavirus restrictions.
The government’s response to corporate financing in the pandemic has so far mainly targeted small firms through such schemes as provision of no-interest and no-collateral loans, reports Reuters.
However, a prolonged pandemic has raised the need not only to respond to short-term financing needs but also to provide capital funds for medium and large firms to reinforce their financial bases, the officials said.
The new scheme will allow government-backed lenders such as the Development Bank of Japan and the Shoko Chukin Bank to provide loans to companies in the restaurant, lodging and other industries.
The move signals a departure from the current practice that does not allow government-affiliated lenders to provide such loans without coordinated lending with private lenders.
Under the new scheme, government-backed lenders are allowed to provide subordinated loans to medium and large companies with low interest rates around 1% for an initial three years, compared to 5.0 per cent or more currently available in many cases.
Flexible lending by the state-backed lenders should help companies boost their financial footing, allowing them to borrow money from banks more easily and avoid bankruptcies.
The existing budget will cover the cost of the new scheme, so no additional spending is needed, the officials said.
The latest move underscores policymakers’ worry that a prolonged pandemic and a delay in the economic recovery could trigger bankruptcies among medium and large firms as well as small ones.
COVID-related bankruptcies totalled 1,150 as of March 12, with bars and restaurants accounting for 186, and hotels and inns making up 81, according to Teikoku Databank, a private credit research firm.