Government-business Relations in Japan - Small Business

Small Business

Japan's streets are lined with small shops, grocery stores, restaurants, and coffeehouses. Although supermarkets and large discount department stores are more common than in the 1980s, the political muscle of small business associations was reflected in the success with which they blocked the nationalization of the country's distribution system. The Large-Scale Retail Store Law of 1973, amended in 1978, made it very difficult in the late 1980s for either Japanese or foreign retailers to establish large, economically efficient outlets in local communities.

Many light industrial goods, such as toys, footwear, pencils, and kitchen utensils, were still manufactured by small local companies rather than imported from the Republic of Korea, Taiwan, or Hong Kong. Traditional handicrafts, such as pottery, silk weaving, and lacquerware, produced using centuries-old methods in small workshops, flourished in every part of the country. Apart from protectionism of the "non-tariff barrier" variety, the government ensured the economic viability of small enterprises through lenient tax policies and access to credit on especially favorable terms.

Major associations representing small and medium-sized enterprises included the generally pro-LDP Japan Chamber of Commerce and Industry (Nihon Shoko Kaigisho, or Nissho for short), which was established in 1922 but whose origins are traced to the establishment of the Tokyo Chamber of Commerce and Industry in 1878, the National Central Association of Medium and Small Enterprise Associations, the Japan League of Medium and Small Enterprise Organizations, and the Japanese Communist Party-sponsored Democratic Merchants and Manufacturers Association.

Although small enterprises in services and manufacturing preserved cultural traditions and enlivened urban areas, a major motivation for government nurturing of small business was social welfare. In Calder's words, "Much of small business, particularly in the distribution sector, serves as a labor reservoir. Its inefficiencies help absorb surplus workers who would be unemployed if distribution, services, and traditional manufacturing were uniformly as efficient as the highly competitive and modernized export sectors.

Lately, however, government relations agencies such as GR Japan and ShinNihon Public Affairs have started to appear also in Japan, run by former diplomats, members of parliament, and civil servants.