As Japan slow-walks stimulus, small businesses fear collapse

• Japan is due to lift its state of emergency for much of the country on Thursday
• In the worst-case scenario, almost 40% of Japan’s 1.5 million companies could go bankrupt if sales continue to fall by 50% for 11 months
• The outbreak has pushed more than 140 companies to bankruptcy since February

TOKYO (Reuters) - For Japan’s shell-shocked small businesses, a promised $1.1 trillion in stimulus is proving too little, too late, raising the likelihood of a surge in bankruptcies at companies that employ nearly three-quarters of the workforce.

Prime Minister Shinzo Abe’s government last month declared a state of emergency in response to the coronavirus crisis and rolled out a package equal to 20% of economic output, including loans for small businesses.

But seven business owners told Reuters of deep frustration at a process they said was taking too long and not delivering enough. Abe, under fire for his handling of the crisis, has said the government would take additional stimulus measures.

But small businesses, which employ 70% of the workforce, are already on the brink of disaster. The outbreak has pushed more than 140 companies to bankruptcy since February, with more expected toward the end of the month, according to research firm Tokyo Shoko Research.

Yuji Hara, 63, the president of Kaze Travel agency in Tokyo, said the biggest worry was his employees. He has applied for government assistance for his workers, which pays employees 8,330 yen ($78) a day. But the money hasn’t arrived yet and he borrowed from a state-backed lender to pay salaries.

With no revenue in April and probably none for the next few months, he’s not sure when he’ll be able to repay that.

“Liquidating the business would be the most decent decision, but I have 30 employees I need to support,” said Hara, sitting in an empty office.

As of Wednesday, 16,724 businesses had applied for such aid, and 6,571 cases had been approved.

In the worst-case scenario, almost 40% of Japan’s 1.5 million companies could go bankrupt if sales continue to fall by 50% for 11 months without bank loans or government stimulus, research firm Teikoku Data Bank predicts.

Although that scenario appears unlikely, it does illustrate how critical government aid is to small companies.

“We know the current situation is not the best,” said an official at the labour ministry, which is charge of some aid.

“We are considering measures to provide the money more quickly,” said the official, who was not authorised to speak to the media and was speaking anonymously. The official added that there was a limit to financial resources for the payments.

Japan is due to lift its state of emergency for much of the country on Thursday, although Tokyo - the heart of the economy - will remain under restrictions.