Japan reviewing definition of small firms in law for realignment

23 September, 2020 12:00 AM printer

TOKYO: The government of Prime Minister Yoshihide Suga will review the basic act on small and midsize enterprises to change the definition of such businesses in efforts to spur industry realignment.

The change is also aimed at encouraging such companies to enhance productivity and raise minimum wages, government officials said.

But hasty moves to redefine small and midsize companies, which are eligible for preferential tax treatment and subsidies, would cost them such benefits and may force some companies out of business, some officials warned, report agencies.

Small and midsize businesses account for 99.7 percent of all Japanese companies. The 1963 law sets out the definition of such businesses for each industry sector. In the manufacturing industry, for instance, such businesses are defined as those capitalized at ¥300 million or less or with a workforce of up to 300.

Since companies that meet the definitions are eligible for preferential tax treatment, they are reluctant to boost their business scale, some analysts said, adding that changing the definitions may prompt industry realignment.

Suga has told industry minister Hiroshi Kajiyama to work out a mechanism that will encourage reorganization among small and midsize businesses. A senior official at the industry ministry said that “we are in the same direction” as the prime minister regarding industry realignment aimed at improving productivity.