There are many small, midsize and tiny companies that are suffering from financial difficulties due to the coronavirus shock. The needed operating funds should be distributed to such companies as quickly as possible.
The Bank of Japan has decided on additional monetary easing. The central bank has expanded its system of supplying funds to banks and shinkin regional credit banks at zero interest. The aim is to expand the fund supply to credit unions and others to make it easier for small and midsize companies to receive loans.
The BOJ will significantly increase its purchases from banks of corporate bonds and commercial paper issued by large enterprises. The move is aimed at helping companies to raise funds by suppressing the rise in yields on corporate bonds. It also has the advantage of increasing the lending capacity of financial institutions.
It can be said that strengthening supports for corporate financial positions is an appropriate measure.
It is important for private financial institutions to take advantage of the latest BOJ measures to expand corporate loans.
The government has begun extending urgent loans with low or virtually no interest through the Japan Finance Corporation and other financial institutions to support small and midsize companies. However, while more than 460,000 applications have been submitted, fewer than 60% have been executed.
If paperwork cannot catch up and corporate financial positions are stalled, it will make no sense. If government loans are delayed, it is essential to provide meticulous support through public-private cooperation, such as private financial institutions providing bridge loans to support companies.
If a supplementary budget for fiscal 2020 is enacted by the end of April, a new loan system with virtually no interest and no collateral will be started by private financial institutions from May. It is important for banks and shinkin banks to prepare for smooth implementation.
All possible steps should be devised for quick implementation, such as expanding the authority of branch offices so that judgments on loans can be made at the branch level and reducing the number of documents required to apply for loans.
For existing loans, it is necessary to consider flexible changes such as extensions of repayment periods and reductions or waivers of interest payments to suit the actual situation of companies.
Many banks have introduced a shift-work system in which employees take turns working at home. This is aimed at continued operation of branches in case an employee is found to be infected. Banks should identify the priority of operations and strive to maintain financial functions.
In addition to measures regarding loans, the government will in May provide up to ¥2 million each to small and midsize companies as well as one-person businesses whose sales have fallen sharply. Many business owners hesitate to take on the burden of debt. Provision of funds that do not require repayment must also be urgent.
Unfortunately, corporate bankruptcies and business closures are increasing. Protecting employment by supporting companies that would otherwise be able to continue business in normal times as much as possible will help the economy recover after the spread of coronavirus infections abates. It is urged that the Financial Services Agency and the BOJ deal with the crisis by closely exchanging information with the private sector.
— The original Japanese article appeared in The Yomiuri Shimbun on April 28, 2020.