Many small and midsized Japanese firms in four industries, including lodging and restaurants, will have difficulty repaying debts if the coronavirus continues to wreak havoc on their businesses through 2021, a think tank report reviewed by Jiji Press showed.
In the report, Nomura Research Institute Ltd.’s Center for Strategic Management & Innovation called for policy measures in response to the crisis, citing concerns that weaknesses in the four sectors will have broad complications for consumption.
The four industries are lodging, restaurants, entertainment such as movie theaters and karaoke outlets, and lifestyle services such as hair and beauty salons. There are some one million small and midsize firms in those industries.
The report said that if the situation persists until autumn 2021, it will take more than 20 years for small and midsize firms in the lodging, restaurant and entertainment industries to repay debts.
If the situation drags on until spring 2022, the lifestyle services sector will be in the same situation, the report said.
Banks classify corporate clients that are unlikely to complete repayments of loans within 20 years as having the potential risk of failure.
Small and midsize companies in the four sectors are increasingly vulnerable to sudden bankruptcies as they struggle to generate profits.
The dire situation could spread to other industries and large companies.
“The government needs to support economic activities while promoting industry consolidation at the same time,” Shinichiro Umeya of the center said.
He stressed the importance of policies that promote reform and protect employment, while adjusting corporate capital and debts through public assistance.