It’s totally unhealthy. Japan’s business cycle isn’t working. When no old companies go out of business, no new ones can come in because there isn’t room. The old companies will always compete on price

Martin Schulz is talking about publicly-traded firms here.

Privately-owned companies are going bankrupt and many more are folding voluntarily. According to the Teikoku Databank 8,164 companies went bankrupt in 2016 and a further 25,000 closed voluntarily.

Propping up the zombie companies is sucking money and workers from other areas. Easy money keeps them alive but two thirds don't even make enough money to pay tax.

https://www.bloomberg.com/politics/articles/2017-03-12/zombie-hordes-thousands-of-japanese-firms-dodging-bankruptcy

Easy money keeps them alive but two thirds don't even make enough money to pay tax.

This isn't necessarily a bad thing to the economy as a whole. With companies kept afloat it keeps people working meaning less people out of job resulting to lower unemployment rate. It also keeps goods moving with the money flow since most companies under this policy purchase goods to balance the books as tax deductions which will otherwise go into the bank without the policy.

I know a lot of private company owners that buys BMW and MB as company cars so not to go too far into the black and be taxed. Most accountants advices these kind of tax deduction methods to companies of all sizes.

People have been saying this about zombie companies for years. Kind of true but also note the comment about these companies keeping unemployment down.

When no old companies go out of business, no new ones can come in because there isn’t room.

-Martin Schulz, an economist at Fujitsu Research Institute

This is about the silliest comment I have ever heard from an economist. Then, I found he works for Fujitsu. It is a company that should have gone bankrupt years ago.

New and innovative companies come into a different field from that of old companies. The existence of old companies does not prevent them. New and un-innovative companies come into the same field. We actually do not need them.

The people from abroad complain about so call Japanese zombie companies like Bloomberg has ulterior motives wanting to change the corporate tax in Japan to have companies not invest so much of their profit as a tax deduction tool and have them declared them as profit to make the Japanese stock market more palatable to fund managers. SMB has little to gain if their stock prices goes up since most of them are privately owned and lose more through corporate tax then if their portfolio is evaluated at a higher price.

Aren't potentially failing companies merged to stave off the stigma of bankruptcy?

With companies kept afloat it keeps people working meaning less people out of job resulting to lower unemployment rate.

For awhile. But the cost of supporting these companies comes out of the people in the form of stagnant wages, and an ever-growing national debt. Japan right now is funding it's present quality of life at the cost of future generations, who are going to be that much worse off.

The unemployment rate be anything but low with the population decline causing a shortage of workers. But since consumption is decreasing in step with the fall in population, there can be no upward pressure on wages.

This isn't necessarily a bad thing to the economy as a whole. With companies kept afloat it keeps people working meaning less people out of job resulting to lower unemployment rate.

Ideally, I think we want to have a balance in the labour market. One where companies that pay well can attract good staff (and thus have an incentive to provide good work conditions), and where workers who slack off don't get work (and thus have an incentive to become more productive).

I think this is how we get economic progress. A low unemployment rate might sound good for the workers, but may not be good for the economy as a whole.

Aughh, no since not all people obtain highly valued skills for the mass or are considered average amongst peers or their skill are highly unique that there is very little demand in the market for those skills.

Basically Japan's most abundant form of SMBs are mom and pop stores that provides service to the local community. They make ends meet but do not really seek a big reward and are satisfied with what they do and is a family business that their children can inherit if they want to.These are the companies that really appreciate the present tax system. Some obtain highly technical skill in in niche traditional items or highly unique craftsmanship that are in demand but are not necessarily required in high volume.

Watch Wafu so honke air on TV Tokyo on Thursdays to gain a better picture of what I am talking about.