Small Business Financing in Japan,from the Prewar to High-Growth Periods: An International Comparison of the Financial History of Small Businesses

Abstract

This study outlines Japan’s policies with regard to small businesses and small business financing, from the prewar period and throughout the postwar reconstruction period, from the viewpoint of international comparisons. The stance of the Japanese government vis-à-vis small businesses in the prewar period was that it should strengthen product competitiveness and credit by organizing them. However, the connection between those policies and finance was weak. Nonetheless, many small businesses made active use of informal transactions or private financial institutions that served small businesses. During wartime, the government forced small businesses to join the munitions industry or face closure. To facilitate changes or closures in small businesses, a governmental financial institution was established. On the other hand, the provision of loans for small businesses via private financial institutions or informal transactions quickly dissolved. During the postwar reconstruction period, the government established the Small Business Agency, resumed policies by which to rationalize and modernize small businesses through better organization, created new financial institutions that served small businesses, and launched government-funded financial assistance packages for small businesses. It is clear that essential institutions and policies supporting small businesses during the time of high economic growth stemmed from the postwar reconstruction era.