Japan’s Looming Business Crisis: The Era of Mass Closures Without Successors

In the quiet halls of Kiyoshi Hashimoto’s machinery factory, there should be a constant hum of industry. Instead, the serene atmosphere allows the sound of his recorder practice to resonate. At 82 years old, Kiyoshi Hashimoto is the founder of a company that has thrived for nearly four decades. However, as he approaches retirement age, he faces a daunting challenge – the absence of a successor or a potential buyer for his business, which still retains loyal clientele. Hashimoto’s predicament is not isolated; it reflects a larger issue that the Japanese government fears could impact up to a third of all small businesses in the country by 2025, triggered by Japan’s shrinking and aging population.

The warning of an “era of mass closures” comes from Shigenobu Abe, an expert from the bankruptcy research firm Teikoku Databank. A government report in 2019 estimated that about 1.27 million small business owners in Japan would be 70 years old or older by 2025 and without successors. This trend could result in the loss of up to 6.5 million jobs and lead to a reduction in the size of Japan’s economy by 22 trillion yen. As the years progress, the situation will worsen as baby boomers reach the average life expectancy for Japanese men, which is 81. This demographic, accounting for most of the presidents of these firms, faces challenges in finding successors to continue their businesses.

The consequences of this phenomenon extend beyond individual businesses. Shigenobu Abe warns that many workers will lose their livelihoods due to these closures. In the past, small businesses in Japan were often handed down to family members or trusted employees. However, Japan’s prolonged economic stagnation has made these businesses less appealing to the younger generation, resulting in a scarcity of potential successors. Additionally, rural areas face even greater difficulties as younger generations tend to prefer urban life, leading to rural depopulation.

Compounding the issue is a cultural reluctance among some older Japanese business owners to sell their family businesses to outsiders. They may perceive such a move as shameful and choose to liquidate their firms instead of seeking buyers. In response to this challenge, the Japanese government has offered generous incentives to encourage sales, and the private sector has also taken initiative in matching investors with businesses for sale.

One such private company is BATONZ, which facilitates business matching. While it has made more than 1,000 matches annually, up from 80 when it was established in 2018, it is still unable to reach all those in need of assistance, according to BATONZ president Yuichi Kamise. The impending wave of closures will not only result in the loss of specialized craftsmanship and unique services but also threaten the preservation of original restaurant recipes that form an essential part of Japan’s social and cultural fabric.

However, some experts believe that this trend could present an opportunity to address inefficiencies and consolidate small businesses that are barely surviving or heavily reliant on subsidies. Hiroshi Miyaji, owner of Yashio Group, a logistics giant founded by his grandfather, has been acquiring various businesses and believes that firms with unique strengths, special know-how, and skilled human resources will always find potential buyers, even without immediate successors.

One case of successful business continuity comes from the experience of Ayako Suzuki, who gave up her corporate career to assist her father with the family trucking business. When none of the firm’s three drivers wanted to take over, BATONZ connected her with Hiroshi Miyaji, who made a commitment to preserve the firm’s employees, clients, and trucks. Suzuki is relieved that the business has found a new home and realizes that her company had value after all.

For some young entrepreneurs, the glut of affordable small businesses presents an opportunity to enter various sectors. Chef Rikuo Morimoto, 28, capitalized on the pandemic-induced setback in his career and used his savings to acquire a 40-year-old diner in Tokyo. He successfully transformed it into his restaurant, “Andante,” while maintaining the decor, furniture, and loyal customers. The opportunity allowed him to establish his business at a fraction of the usual cost.

Despite some success stories, the future of many businesses, like Hashimoto’s machinery factory, remains uncertain. Efforts to groom successors have not yet borne fruit. For those in a similar position, they remain hopeful that someone will come along and breathe new life into their enterprises.

The challenges faced by small businesses in Japan not only impact individual entrepreneurs but also have significant implications for the nation’s economy, culture, and social fabric. As the government and private sector seek solutions to this impending crisis, the hope is to foster a new generation of entrepreneurs and sustain the legacy of small businesses that form an integral part of Japan’s identity.

© 2023 AFP

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