April 24, 2024

Japan Business Without Successor

Kiyoshi Hashimoto founded his company nearly 40 years ago, but he has no successor or buyer well past retirement age.
AFP

Kiyoshi Hashimoto’s machinery factory outside Tokyo should be doing well for the industry. Instead, it’s so quiet you can hear him practicing the recording.

The 82-year-old entrepreneur founded his company almost 40 years ago, but well past retirement age he has no successor or buyer for a business that retains loyal clients.

It’s a problem the Japanese government warns could affect up to a third of the country’s small businesses by 2025, as the country’s population ages.

“It would all be wasted if I closed now,” said Hashimoto, whose factory in Yachimata, east of Tokyo, is filled with workbenches, drill tables and parts cabinets.

It once employed dozens of people, but has reduced operations to just two part-time workers.

The problem is so great that Japan is facing an “era of mass closure”, said Shigenobu Abe of bankruptcy research firm Teikoku Databank.

A 2019 government report estimated that around 1.27 million small business owners would be 70 or older by 2025 and have no successors.

The trend could kill up to 6.5 million jobs and reduce the size of Japan’s economy by ¥22 trillion ($166 billion), the study warned.

By 2029, the situation will be even worse, as baby boomers hit 81, the average life expectancy for Japanese men, who are most of the presidents of those companies, according to Teikoku Databank.

“We know for sure that many workers will lose their livelihoods because of this,” Abe told AFP.

As elsewhere, small businesses in Japan are often passed on to family or trusted employees.

But the country’s prolonged economic stagnation has made small businesses unattractive to young people.

Businesses in rural areas struggle more due to a preference for city life and a growing trend of rural depopulation.

Adding to the problem is a feeling among some older Japanese that it is shameful to sell a family business to outsiders.

Some liquidate their businesses rather than seek buyers.

The Japanese government offers generous incentives to encourage sales, and the private sector has also jumped in to match investors with businesses for sale.

The BATONZ Company now makes more than 1,000 matches a year, up from just 80 when it opened in 2018.

Still, it reaches a fraction of the people who need it, said BATONZ president Yuichi Kamise.

Waves of closures will mean the loss of specialized craftsmanship, unique services and original restaurant recipes that make up Japan’s social and cultural fabric, he said.

“Over time, what makes Japan unique may disappear due to lack of successors,” he said.

“I think it will give a big blow to Japanese culture and the attractiveness of Japan as a tourist destination.”

Some, however, feel that the trend offers an opportunity to fix inefficiencies and consolidate small businesses that are barely scraping by or subsisting on subsidies.

Hiroshi Miyaji, 50, owns Yashio Group, a logistics giant started by his grandfather, and has acquired various businesses.

“There will always be buyers for businesses, with or without a successor, that have unique strengths, special know-how and human resources,” said Miyaji, a third-generation president.

With the help of BATONZ, he recently bought a small trucking company from 61-year-old Ayako Suzuki.

Suzuki quit her corporate career to help her father with the business he started in 1975.

None of the company’s three drivers wanted to take over and she was asked to come together and help her father, who was then in his late eighties.

But problems quickly arose: the coronavirus pandemic hit, a driver left, trucks needed maintenance, and before long she was dipping into savings to stay afloat.

“I wanted to keep the business going, at least when my father was alive,” she told AFP.

BATONZ connected her with Miyaji, who promised to keep the firm’s employees, clients and trucks.

“I’m more relieved than sad,” she said.

“I didn’t think our company was worth anything.”

The glut of affordable small businesses can be a boon for young people looking to break into a sector.

Among them is the 28-year-old chef Rikuo Morimoto.

When the pandemic prevented him from studying in Italy, he used his savings to buy a four-decade-old restaurant in Tokyo and start a restaurant at a fraction of the usual cost.

He kept the decor, furniture and many established customers of “Andante”, a beloved neighborhood restaurant in the Suginami area, while offering his own menu.

“I thought I could only afford to have a food truck or a small bar,” he said.

Not everyone is so lucky, and the future of Hashimoto’s machinery factory remains uncertain, despite his efforts to group three successors.

“I’m just waiting for someone to come along and use this,” he said.

A government report in 2019 estimated that around 1.27 million small business owners would be 70 or older by 2025 and have no successors.
A government report in 2019 estimated that around 1.27 million small business owners would be 70 or older by 2025 and have no successors.
AFP
The Japanese government offers generous incentives to encourage sales, and the private sector has also jumped in to match investors with businesses for sale.
The Japanese government offers generous incentives to encourage sales, and the private sector has also jumped in to match investors with businesses for sale.
AFP
Waves of closures will mean the loss of specialized crafts, unique services and original restaurant recipes that comprise Japan's social and cultural fabric.
Waves of closures will mean the loss of specialized crafts, unique services and original restaurant recipes that comprise Japan’s social and cultural fabric.
AFP
Chef Rikuo Morimoto used his savings to buy a four-decade-old restaurant in Tokyo and start a restaurant at a fraction of the usual cost
Chef Rikuo Morimoto used his savings to buy a four-decade-old restaurant in Tokyo and start a restaurant at a fraction of the usual cost
AFP

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