It is only now, almost six months after the Tohoku earthquake, that the scale of the damage to Japan Inc can be properly assessed. The big companies have made reasonably robust recoveries – even those with exposure to facilities washed away by the tsunami. It is the smallest businesses that are hurting. On Friday, the ministry of finance published its regular tally of corporations’ financial statements, covering the period from April to June. While those with capital of at least Y1bn (US$13m) saw ordinary profits drop by almost 4 per cent, year-on-year, those with capital between Y10m and Y100m suffered a 40 per cent fall.
This is a volatile data set: even the bigger companies can see double-digit percentage swings from quarter to quarter in aggregate ordinary profits (operating profits plus interest and non-operating income). Even so, it suggests an enduring shock to the core of the system. Small businesses accounted for Y133,000bn of sales – 42 per cent of the total – during the period. A year ago, they accounted for Y174,000bn (50 per cent). That 24 per cent contraction was worse than at any point during the 2008-2009 crisis. Such a squeeze on the most risk-taking segment of the economy will not do anything to encourage banks to loosen lending standards. While the likes of Asahi might find it easy to pick up a cheap loan to buy assets, for example, a small liquor wholesaler probably will not. Hence the precipitous fall in small companies’ investments in plants and equipment during the period, off 16 per cent, three times more than the billion-plus club.