Small businesses in Japan continue to languish in the midst of a protracted economic slump. Compounding their predicament is the tight lending policy of private banks, which are said to be more selective toward smaller borrowers than larger ones. Banks may have their own reasons to restrict lending, but the fact remains that the small-business sector -- that vast reservoir of entrepreneurship -- is starved for cash.
That is why lenders must provide more positive support for restructuring efforts in this sector. As the latest annual report from the Small and Medium Enterprise Agency points out, easing the credit crunch is an essential step toward business recovery. Therefore, banks should be ready to lend more money to small, promising companies. At the same time, the government and the central bank should cooperate closely to facilitate bank lending.
Particularly worrying are recent moves by top banks to curb small-business loans. Mizuho Holdings, for instance, reduced such lending by 5 trillion yen between the spring and autumn of last year -- a figure that far exceeded comparable figures for other major banks. The bank's explanation that the cut reflected a drop in demand for loans is not convincing.