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Editorial: Quick rescue needed for businesses struggling to pay rent

  • May 14, 2020
  • , The Japan News , 12:03 p.m.
  • English Press

Many businesses, including restaurant, service and other industries, are facing difficulty paying their rent due to a suspension of operations or a fall in profits caused by the spread of the new coronavirus. Measures should be taken immediately to help them continue running.


The ruling Liberal Democratic Party and its coalition partner, Komeito, have drawn up measures to support small and midsize businesses that are burdened by their rent payments.


The system for the support measures is that such businesses will, for the time being, take out loans with virtually no interest and no collateral from government-affiliated financial institutions and others, and the government will later subsidize the amount they used for their rent.


The government plans to facilitate the design of this support system in line with the ruling parties’ measures, and include it in the second supplementary budget plan. On the other hand, five opposition parties have submitted their own bill to the Diet proposing that government-affiliated financial institutions shoulder businesses’ rent and postpone repayments for one year.


The ruling and opposition parties must exchange constructive opinions and work out effective measures.


Many small and midsize businesses rent their premises, and the fixed rent is a heavy burden on them. There is a fear that the number of jobless people will increase sharply if businesses close one after another because they cannot afford to pay the rent.


The ruling parties’ measures target operators whose monthly sales have fallen by more than 50% from a year earlier. They also plan to apply the support system to businesses whose sales fall by more than 30% over three months.


The subsidy is set at two-thirds of the rental amount, with up to ¥500,000 a month offered for a small and midsize company and ¥250,000 for a one-person business. It is offered for six months in total and the subsidy will be paid as early as June.


It is difficult for businesses with no prospect of improving profits to borrow more money. It is reasonable for the government to support them with subsidies.


However, rent varies greatly depending on the areas of shops and other conditions. There is also a difference in unit values between urban and rural areas.


Some people, mainly in urban areas, say the monthly limit of ¥500,000 is not sufficient.


The ruling parties’ system also includes fiscal measures for local governments that have their own measures to deal with rent for struggling businesses. It may be advisable for each local government to consider adding their subsidies to those from the central government, depending on local circumstances.


What is worrisome is how businesses can secure operating funds until the rent support is provided.


Government-affiliated financial institutions have been flooded with applications for loans with virtually no interest and no collateral. A situation should be avoided in which loans are delayed and people go out of business before receiving the subsidies.


Since May, private financial institutions, including regional banks, have extended similar loans. Smooth procedures and loan screening are required.


Many property owners are small and midsize businesses operators themselves. In some cases, they use the rental income from tenants to repay debts.


It is hoped that financial institutions will flexibly take actions, such as postponing repayments, so that the operations of small and midsize property owners will not get bogged down before the rent support has a visible effect.


— The original Japanese article appeared in The Yomiuri Shimbun on May 14, 2020.

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