The Policy Approach In Promoting Small And Medium Sized Enterprises In Japan

Abstract

The purpose of this paper is threefold: 1) to investigate the role of small and medium sized enterprises (SMEs) in the economy, 2) to classify obstacles for SMEs’ growth, and 3)to review policy measures in Japan and problems to be solved as soon as possible.

This study indicates that SMEs have played a significant role in the economy. SMEs create production linkages among companies in the economy by supplying goods and services. In addition, SMEs have been a main promoter of trade. Moreover, SMEs provide people with various job opportunities, which generate an important source of income. SMEs, however, face many obstacles to sustainable development. One major problem is that SMEs have limited financial resources compared with large enterprises. Due to this financial constraint, it is difficult for SMEs to upgrade production facilities and keep up with new technology. Furthermore, SMEs are suffering from a shortage of skilled labor. This becomes more serious when they try to expand business in the global market. In order for SMEs to compete with rivals in the international market, employees need a wide variety of knowledge and skills, such as foreign business know-how, human resource management, foreign language expertise, etc. Human resources of SMEs are often insufficient to meet their business needs.

In Japan, both the central and local governments have implemented various policies to address these challenges. This research found that some policies worked well and supported SMEs, while others did not. The author, however, points out that some studies need to be carefully reconsidered because there is no consistent framework for policy evaluation. This means that the results of the evaluation of SMEs are likely to vary because of the different methodologies used. Thus, this paper recommends the government develop an appropriate system for assessing SME policies.