Paper short abstract:

By analyzing the CRD, a database on Japanese small businesses financial data, we clarified how the Japanese small businesses have been affected by the Lehman Shock and Abenomics, an economic policy package implemented by the Abe Administration.

Paper long abstract:

As in other major industrial countries, small businesses in Japan (firms either with 1-300 employees or with capital less than \300 million) play an important role in her economic activities. Their business conditions are showing the sign of improvement, but they still face a number of challenges and thus their revitalization remains one of the most important policy issues in Japan. But their business performances have not been well analyzed due to the lack of database on their financial results especially in those with less than 20 employees accounting for 85% of them. We overcome this difficulty by using the database named as the Credit Risk Database (CRD) on small businesses financial data managed by CRD Association in Tokyo, Japan.

In this paper we try to clarify how the Japanese small businesses have been affected by the Lehman Shock and Abenomics, an economic policy package implemented by the Abe Administration, to pin point the policy agenda that are urgently required, and to depict the typical character of Japanese small businesses by analyzing the CRD. And we have found the following three facts. First, small businesses in Japan have managed to overcome the adverse effects of the Lehman Shock through cost reductions but their recovery is not strong enough to clear the pre-Lehman Shock performance. Second, Abenomics have contributed to support the recovery of Japanese small businesses but its effect remains to be mild. Third, in the midst of the Lehman Shock two different types of financial behavior were observed in the Japanese small businesses; small firms with employees of less than 10 piled up the cash holdings by increasing the long-term borrowings and maintained such cash positions, while other firms continued to reduce borrowings.