Japanese SMEs: Challenges & Solutions

Overcoming SME obstacles to drive economic growth

Japanese SMEs

What are the challenges of Japanese SMEs?

According to Japan Finance Corporation, over 99% of all businesses in Japan are small and medium-sized enterprises (SMEs), which employ almost 70% of the country’s workers. This means that Japanese SMEs play a significant role in the economy and are major contributors to the country’s economic growth.

However, several challenges might stand in the way of these companies’ growth and success.

Japanese SMEs are major contributors to the country’s economic growth

If you’re thinking about breaking into the Japanese market, here are some obstacles you’ll have to face. But relax; we’ll also cover ways how to overcome these challenges!

Japanese SMEs’ Poor Financial Opportunity

It is common for Japanese SMEs to have trouble securing the capital they need to expand and grow. It is because many people either need to learn about or can’t access alternative funding sources. Oftentimes, they need more assets to secure a loan.

Many startups immediately explore loans and other funding sources to help fund their capital cash flow requirements. But in any economic scenario, loans are difficult to secure. For example, the approval rate for SBA-guaranteed loans is higher than for conventional loans. However, it still depends on factors, including your location, the type of business you want to start, and your level of business expertise.

Today, many options exist for securing financial backing but, you can use something that already exists.
• ROBS, or Rollovers for Business Startups – access to 401(k) and other retirement savings for business purposes.
• HELOCs, or Home Equity Lines of Credit – authorize homeowners to borrow funds against the value of their homes.

Check out this article for some Japanese finance corporation and government support.

Challenges in Entering Global Markets

Many Japanese SMEs are community-based establishments that face challenges when trying to sell their products abroad. Several factors contribute to this, including the high exporting expenses and a need for more understanding about reaching global markets.

The government is helping these businesses with areas like market research, product development, and foreign marketing.

Challenge in Hiring and Retaining Qualified Employees

Due to Japan’s competitive job market and the appeal of working for larger organizations, it can be difficult for SMEs to attract and retain competent people.

You can combat this issue by giving them easier access to training and education programs and financial incentives. Many people looking for work are discouraged by the high cost of health insurance. Therefore it’s in your best interest to offer generous benefits.

High Business Expenses

Rent, electricity, and other overheads add up quickly for any company in Japan. As a result, SMEs may need help to compete with larger corporations with economies of scale.

To deal with this problem, the government cut costs by helping people buy energy-efficient equipment and share office space.

Limitations with Digital technologies

Japanese SMEs need help in adopting and using digital technologies as the business landscape becomes more digital.

Financial limitations are recognized as the primary obstacle to digital transformation. Another challenge is finding more talent in numerous IT-related fields, including big data analytics, robotics technicians, and IT managers.

The availability of cheap, reliable broadband internet and focus on digital education and policy will also help pave the way for more widespread technological adoption in the corporate sector.

Get Help from the Experts for Japanese SMEs

SME Japan’s primary mission is to support newly formed and emerging enterprises. We can advise on finance strategies, company structure, and other critical concerns. We’ll be there to guide you as your company grows and evolves, so give us a call right now to find out how we can assist you!

"Otsumami" - a bite size snack:

SMEs are often at the forefront of innovation and responsible for many technological advances that drive economic growth.

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