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BOJ rate hike may help exit of unprofitable 'zombie' firms in Japan

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The coronavirus pandemic, in particular, pushed up the number of such zombie firms -- companies barely surviving despite being unable to cover debt-serving costs with profits -- amid the government's massive financial stimulus to small and medium-sized companies.

This picture of the BOJ and this example should be in the encyclopedia under the heading "socialism for the rich".

-4 ( +5 / -9 )

""zombie" companies"

Not only companies but also Zombie small businesses, Zombie families, households, will be impacted. anyone who borrowed money with an adjustable rate % will get shafted and go out of business. Anyone who is thinking about borrowing butter do it fast before loan sharks and greedy banks go crazy, or better yet DO NOT BORROW for now.

1 ( +4 / -3 )

What bothers me about these kinds of stories is that you'd think these zombie companies were bad and that they were just leaching off society and not doing anything good. These were once profitable companies or small businesses that were/are trying their best, but for whatever reason they are failing. But here we are cheering them into bankruptcy saying that this is good for the economy, and don't worry those workers they won't have any trouble finding new jobs! Tell that to some 52 year old who gets let go and has to start over, or is never hired again because of age discrimination!

3 ( +6 / -3 )

agree with the above posters

-6 ( +5 / -11 )

I don’t consider the Japanese workforce very fluid. Even young people are quite negative about jobs and the future. Expect the real unemployment rate to rise.

-1 ( +2 / -3 )

It could "invigorate" the economy, as bankruptcies of unprofitable businesses may prompt their workers to seek better opportunities in growing industries, said Koichi Fujishiro, senior economist at the Dai-ichi Life Research Institute.

Clueless comment that of course could only come from a "senior economist at the Dai-ichi Life Research Institute."

Middle level and middle age white collar managers at these companies are not suddenly going to learn how to code Python.

https://www.theatlantic.com/education/archive/2018/01/the-false-promises-of-worker-retraining/549398/

Hopefully they have saved some money through the years from "the government's massive financial stimulus to small and medium-sized companies.'.

Otherwise working at the combini cash register, daycare or nursing home?

1 ( +5 / -4 )

“It could "invigorate" the economy, as bankruptcies of unprofitable businesses may prompt their workers to seek better opportunities in growing industries”

It all sounds good in theory but it won’t work like that. People are not like machine parts that can be taken from one workplace and fit into another. Many workers would end up with less paying jobs or none at all.

3 ( +4 / -1 )

MarkX

But here we are cheering them into bankruptcy

We should be celebrating their demise. Japan has a severe labor shortage, while many workers are holed up in these stagnant swamps, which have contributed greatly to the deflationary trend as they tend to cut wages and never raise them.

Of course, it would help if the government didn't keep subsidizing them or arranging to supply them with third-world workers.

-4 ( +1 / -5 )

JPY 50% loss of purchasing power in 5 years.

Fire these clowns already

-1 ( +2 / -3 )

@dagon

Financially supporting little business owner so that they do no go bankrupt during an international crisis is socialist for the rich ? I think we do not have the same definition of rich.

@JeffLee

The issue of Japan regarding labor is not shortage but mismanagement including by not offering attractive working conditions.

Perhaps you should reconsider who is responsible of the wages stagnancy.

https://www.asahi.com/ajw/articles/15198290

https://www.asahi.com/ajw/articles/15197291

https://www.asahi.com/ajw/articles/15198773

Government by deregulating market and employment ?

Big companies by being greedy thus squeezing all they can from their supplier and low standing worker ?

Small business owner by trying to not lost everything and putting their worker at risk of unemployment/slave employment/... ?

In a country were lot of companies (including major one) kept claiming suffering from labor shortage while never improving working conditions, as pointed by others, it will just end up throwing lot of people into precarious situation and increase power of companies to offer bad working conditions. And that will most likely will not help countryside.

0 ( +1 / -1 )

@dagon

Financially supporting little business owner so that they do no go bankrupt during an international crisis is socialist for the rich ? I think we do not have the same definition of rich.

When the business owners are de facto possessors of capital and or property and receiving funds from the public treasury while workers are laid off and receive zero then yes this exactly fits the terminology of "socialism for the rich".

https://www.nippon.com/en/japan-topics/g01025/

Or call them the Japanese petit bourgeoise if you want to distinguish them from the really wealthy who made out like gangsters by the BOJ and LDP policies.

-1 ( +1 / -2 )

@dagon

So you are assuming all these companies actually had workers and laid them off and the said workers got nothing. I think you got the wrong country :

the article clearly state that laid off worker are eligible to government subsidies

among these small companies there are freelancer

it is not so easy to lay off people in Japan, so companies will try their best to have you quit or use temporary worker

there is a system in Japan in which an employer can have an employee not work and pay them 60% of their salary. It was actually subsided by the government during covid to prevent lay off.

...

And do you really think that anybody having property and/or capital is rich thus should not receive any government subsidies, like for example : worker which dare to own their house/car/shoes/... ?

I think you should be the first one I meet claiming "petite bourgeoisie" was among rich. They are even seen as victim of the system along with poor since they are powerless.

Sorry, I will be blunt : do you even try to look into the term you use and the subject you are talking about ?

1 ( +1 / -0 )

MichaelBukakisToday  09:19 am JST

JPY 50% loss of purchasing power in 5 years.

Fire these clowns already

JPY at about 100 in early Jan 2021, so just over 3 yrs.

0 ( +2 / -2 )

What's the 'cost' of allowing zombie companies to continue operating? That's the parallel question.

-1 ( +1 / -2 )

What's the 'cost' of allowing zombie companies to continue operating? That's the parallel question.

My guess is that keeping interest rates low is one reason zombie companies can survive, but that is not the purpose of low interest rates. The larger problem is that the government is insolvent already and more so if interest rates rise. We risk a major economic catastrophe if the government tanks which based on my understanding of history will cause it to pursue the only way out which is a war.

0 ( +0 / -0 )

So you are assuming all these companies actually had workers and laid them off and the said workers got nothing. I think you got the wrong country :

the article clearly state that laid off worker are eligible to government subsidies

among these small companies there are freelancer

it is not so easy to lay off people in Japan, so companies will try their best to have you quit or use temporary worker

Nonsense, nowhere does it state that about workers, reading comprehension is essential.

Japan did not have payroll protection, worker furlough pay, and stimulus pay to workers like in other nations like NZ, full stop.

https://mainichi.jp/english/articles/20230130/p2a/00m/0li/025000c

https://www.asahi.com/ajw/articles/14327121

Suga and BOJ policies had it all going to large, medium and small business; in that order.

-2 ( +1 / -3 )

According to Investopedia, here is what happens when a country goes bankrupt and cannot pay its debt, these may sound familiar-

Rising costs of food and other goods and services due to inflation as a government prints money to support its expenditures.

Higher interest rates on mortgages, credit card debt, car loans, and more.

The loss of jobs and growing unemployment as companies and the government slash their spending.

A descent into poverty for millions of people.

A plunge in economic activity and the potential for a recession.

Cuts to a nation's all-important services, such as healthcare, public safety, social services, and education.
2 ( +2 / -0 )

@dagon

I think it is in good standing to check your reading comprehension before attacking other :

she had no choice but to say she was quitting of her own initiative, which would affect when she could collect unemployment

[...]

“Some companies are resisting the pressure to let employees go,” he explains. “But as business conditions continue to deteriorate, they are prioritizing the retention of full-time employees at the expense of nonregular staff.”

https://www.nippon.com/en/japan-topics/g01025/

man who is searching for work as he lives on welfare. After he was dismissed from a vehicle parts factory in autumn last year,

[...]

She said that she meets many people who sign Japanese-language resignation notices that are presented to them by the company, without understanding what is written on them.

https://mainichi.jp/english/articles/20230130/p2a/00m/0li/025000c

people who have been fired or not had their contracts renewed

https://www.asahi.com/ajw/articles/14327121

As you see in these article that you quoted : people could get government subsidy in the form of unemployment benefice or welfare. And, companies use temporary workers and resignations as leverage to manage the size of their workforce.

Regarding Kyugyo Teate, my memory served me wrong the subsidy seems not covid related and not 100% : https://generalunion.org/5300/

Regarding the stimulus payment ? Are you talking about the 100000 yens ?

Suga and BOJ policies had it all going to large, medium and small business; in that order.

How does that justify claiming that giving subsidies to small and middle sided company is capitalism for the rich ?

I remember you, it is what you are claiming.

"Too big to fall" is socialism for the rich. Not : giving subsidies to mom and pop restaurant or so.

So that you will perhaps start to grasp a bit more of how Japan work, I have a big surprise : Japanese government prefer giving loan than money. I will let you meditate about the implication, enjoy.

https://www.whitecase.com/insight-alert/covid-19-japanese-government-financial-assistance-measures

https://www3.nhk.or.jp/nhkworld/en/news/backstories/1991/

1 ( +1 / -0 )

This is the first article where I see this being shown as a good thing. There is a scary amount of these companies in Japan, most of these companies hire people. What Japan wants most is for people to start consuming more, but what happens when a large portion of the population loses their job.

0 ( +0 / -0 )

@ Flute

*She had no choice but to say she was quitting of her own initiative, which would affect when she could *collect unemployment

Absolute fail.

Did you grok the meaning of this sentence?

As happened in multiple situations people were not officially fired from contracted positions, they were pressured by coercion and reduced shift hours until "She had no choice but to say she was quitting of her own initiative. "

So as she could not collect unemployment.

Highlighting and reading fail.

https://www3.nhk.or.jp/nhkworld/en/news/backstories/1387/

negative legacy of its ultraloose monetary policy that has allowed many unprofitable "zombie" companies to stay afloat

By its very nature and lack of over-watch (stimulus funds delivered to company heads instead of directly to workers ) the BOJ and LDP policies were an exercise in socialism for the rich and abandonment of workers.

-2 ( +0 / -2 )

Japanese will never consumer more, why? Aging and depopulation, that's strictly LESS consumption.

Plus, given shrinking and aging population, who in their right mind's eager to invest in Japan? It's a death spiral, Galapagos culture not competitive and too inefficient in today's world based upon global standards and values.

Plus, massive Govt. debt and growing elderly support costs scares everyone. Zombie companies, one more problem in need of unwinding; Japan needs a full on reset!

-3 ( +0 / -3 )

Once upon a time large businesses never existed only small and mom and pop businesses than came factories and chain stores like 711 that drove many of these businesses out of business and or drove them to get bank loans so they could restructure and stay in business.

My heart goes out to those who pay taxes, are working and wanting to make a life that is their own and where life may be more of a struggle.

With all my words, 1 percent interest rate is nothing compared to the reality of the rest of the world where many are paying 4 or 6 percent. This gives many a wakeup call to get their finances in order, because I only see the interest rates going up in the future.

-1 ( +0 / -1 )

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