The government looks set to support major companies that have a significant influence on employment and the economy, and small and midsize companies that supply special technologies under an envisaged measure to boost the capital of nonfinancial private companies, according to sources. However, to ensure that public funds are not used to prop up structurally problematic companies, the measure likely will not cover companies that have performed badly for an extended period. The government has presented during the current Diet session a revision bill for the Industrial Revitalization Law to enable the Development Bank of Japan to invest in private companies and cover 50 percent to 80 percent of their losses with public funds. The new measure is expected to be implemented in May. The government likely will assist companies that fulfill the following criteria:
- Firms whose collapse would significantly affect local economies and the public at large.
- Firms that can expect an improvement in earnings within three years if the market recovers.
- Firms that can secure financial support from private financial institutions.
A company would satisfy the first condition based on the size of its workforce and likely influence on customers, subsidiaries and related industries in the case of collapse...By invoking the second and third conditions, the government aims to clarify that the new measure is an emergency project to overcome the U.S.-spawned financial crisis and subsequent drastic deterioration of the domestic economy. To avoid criticism from the international community over the introduction of protectionist steps, the new measure is not expected to apply to companies whose performance remains stagnant due to a failure to respond to changes in public demand...more...
