The Business Exodus: Japanese Small Businesses looking for an heir

In Yachimata, Chiba Prefecture, the once bustling machinery factory of 82-year-old entrepreneur Kiyoshi Hashimoto is now eerily quiet. With no successor or potential buyer, the business he founded four decades ago struggles to find a way forward amidst Japan’s rapidly aging population.

This predicament is not unique to Hashimoto; it is a looming crisis that the Japanese government warns could impact up to a third of all small businesses in the country by 2025. As the nation’s population continues to shrink and age, a staggering number of businesses risk closure, leading some experts to label it an “era of mass closures.”

A 2019 government report projected that around 1.27 million small business owners, aged 70 and above, will face the lack of successors by 2025. This concerning trend could result in the loss of up to 6.5 million jobs and significantly reduce the Japanese economy by 22 trillion yen.

As the baby boomer generation reaches 81, Japan faces an additional challenge, as most small businesses are led by men, who are more susceptible to the impact of the demographic shift.

“We know for sure that many workers will lose their livelihoods because of this,” warns Shigenobu Abe of bankruptcy research firm Teikoku Databank.

The issue is further compounded by the decline of interest in rural areas, with young people showing a preference for city life, leading to rural depopulation. Additionally, cultural factors play a role, as some older Japanese view selling a family business to outsiders as shameful. Consequently, some owners opt to liquidate their firms instead of seeking potential buyers.

In an effort to mitigate the crisis, the Japanese government has offered attractive incentives to encourage business sales, and the private sector has stepped in to facilitate matches between potential investors and businesses for sale. However, while these efforts have yielded positive results, they still fall short of addressing the scale of the problem.

The potential wave of closures raises concerns about the loss of specialized craftsmanship, unique services, and traditional restaurant recipes that are essential components of Japan’s social and cultural fabric. Such losses could erode Japan’s distinctiveness and appeal as a tourism destination.

However, some see a silver lining amid the challenges. Hiroshi Miyaji, owner of Yashio Group, a logistics giant founded by his grandfather, views the trend as an opportunity to address inefficiencies and consolidate struggling businesses. He believes that firms with unique strengths, special know-how, and valuable human resources will always find buyers.

Indeed, there are hopeful stories of young entrepreneurs capitalizing on the situation. Chef Rikuo Morimoto, unable to study abroad due to the pandemic, used his savings to purchase a decades-old diner in Tokyo. He turned it into a restaurant at a fraction of the normal cost while retaining the restaurant’s beloved atmosphere and loyal customers.

However, many small business owners like Hashimoto continue to face an uncertain future despite their efforts to find successors. As he awaits someone who can make use of his factory, the fate of his legacy hangs in the balance.

In conclusion, the challenge of finding successors for aging small business owners in Japan is a pressing concern. While the government and private sector have taken steps to address the issue, the scale of the problem calls for further concerted efforts to preserve Japan’s unique cultural heritage and support the transition of these businesses in the changing landscape.

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