Business

Japan's COVID-19 recovery plan frustrates struggling restaurants

¥230 trillion stimulus falls short of supporting small businesses, which employ 70 percent of nation’s workforce

Reuters

As the coronavirus takes its toll on the economy, the government’s huge stimulus package has come under fire from hard-hit restaurant owners for channelling funds to promote items like wagyu, melons and tourism rather than accelerating help for firms with burning cash needs.

The industry’s struggles highlight a larger problem in the revival plan, which at more than ¥230 trillion is the size of Italy’s economy but still falling short of sufficient support for an important segment — the small businesses that employ 70 percent of the nation’s workforce.

That puts Japan’s recovery from its worst modern recession at risk. The $232 billion (¥25.3 trillion) restaurant industry is crucial to boosting growth as it, together with the lodging industry, creates about 1.3 million new jobs a year, or roughly 17 percent of all the new employment.

More than 190 small businesses including 30 restaurant operators have gone bust during the coronavirus crisis. Yet, the government’s slow response in pushing through billions of dollars stuck in paperwork is threatening the same fate for many more firms in urgent need of cash to pay salaries and rents.

In contrast, authorities have rapidly pressed ahead with plans to spend nearly $16 billion for a “go-to” campaign to promote tourism, and $1.3 billion to help politically powerful farmers and fishermen promote expensive foodstuffs such as mangos, tuna and yellowtail. An extra $90 million has also been set aside to promote international flights — when almost all planes are grounded.

“We, as well as many others, are running out of money. If the situation is left as is, we will go under one after another. Then, no one will be left to benefit from the tourism campaign,” said Yoshikazu Moriyama, 42.

Sales at Moriyama’s six Irom Inc. fish restaurants have tanked 90 percent and he’s struggling to pay rent and salaries for some 100 staff.

“What we need now is financial support to help us pay rents and compensate for business closures rather than future campaign on tourism,” Moriyama said.

Some owners say the government’s subsidy of up to $55,000 for each firm to cover rents is insufficient, and that it can afford to do more to keep businesses open and free up cash flow. Last year, rents for all of Japan’s restaurants totaled $13 billion — less than the $16 billion going into tourism promotion.

A waitress cleans a table at a restaurant in Tokyo on May 8 as businesses struggled under coronavirus measures. | REUTERS
A waitress cleans a table at a restaurant in Tokyo on May 8 as businesses struggled under coronavirus measures. | REUTERS

The government’s subsidy list includes such items as five-star sirloin Kobe steak, which costs some $37.20 for 100 grams, and top-quality Yubari melon that sells for more than $90 per 1.6 kg.

Agriculture ministry official Satoru Nishio said the subsidy, which also covers expensive mangos, strawberries and tuna, was intended “to back farmers facing a decline in inbound tourists and exports.”

The government subsidizes half of the cost of buying the produce for e-commerce, take-away services and the provision of school meals. For example, traders get up to $9.31 per 100 grams of wagyu beef and up to $22.34 per kilogram of melons.

While a total of $190 billion in financing, loans, cash subsidies and other benefits have been set aside for small businesses, some analysts say struggling firms have been deprived of quick access to much-needed cash due to red tape.

“A government financial agency should provide loans that can be allotted to rents to prevent cash flow from drying up,” said Kota Matsuda, a former lawmaker who now runs a chain of 30 restaurants including 22 Hawaiian-style restaurants called Eggs ‘n Things, employing about 600 workers.

“It’s impossible to cover rents solely with subsidies,” said Matsuda, who has applied for funds but has been frustrated by the cumbersome process as he tries to meet cash needs for more than $650,000 for salaries and $372,370 for rents.

Sales at his restaurants, which reopened fully last Saturday, declined by 90 to 95 percent year on year in April.

Irom’s Moriyama, who applied for a couple of subsidies, said they were “far from enough” to make up for the losses.

“I can’t foresee what will happen to my business.”

Your news needs your support

Since the early stages of the COVID-19 crisis, The Japan Times has been providing free access to crucial news on the impact of the novel coronavirus as well as practical information about how to cope with the pandemic. Please consider subscribing today so we can continue offering you up-to-date, in-depth news about Japan.

Coronavirus banner