Japanese Government Announces Scheme to Offer Support to Mid and Large Companies
The Japanese government has announced a new scheme to provide aid to mid-sized and large companies increase their capital funds – a development that is aimed to support the sectors worst affected by the coronavirus pandemic and ensuing restrictions. After focusing their efforts mostly towards small companies, this is one of the first measures the government has taken to provide capital funds to medium and large sized firms to strengthen their financial base.
As part of this initiative, government backed lenders including the Development Bank of Japan and Shoko Chukin Bank can now extend loans to companies that operate in the restaurant, lodging and other businesses. This would be the first time that Japan’s government is permitting such lenders to offer loans without the need to coordinate with private players in this space.
While company loans generally have an interest rate of 5% or higher, the new scheme unveiled today will make loans available to firms at interest rates around 1% for the first three years. This move will help businesses increase their borrowing and prevent the incidence of bankruptcies.
So far, more than 1,100 companies across Japan have filed for bankruptcies over the past year since the pandemic first struck and forced the country into lockdown. This new scheme can be financed by the existing budget and will require no additional spending by the government even as it improves the prospects of recovery for the world’s third largest economy.
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