JAPAN MNE Insights
Volume 7, Issue 1
July 2021
CONTENTS

1. Special Essay:
Research on JapaneseBusiness: From theOutside, Looking inJapan Academy of Multinational Enterprises

http://www.mne-jp.org

Special Essay:
Research on Japanese Business:
From the Outside, Looking in

2. Special Essay:
Thoughts on JapaneseCorporate Support
Measures in the Context
of Covid-19

Elizabeth L. Rose
Professor of International Business
University of Leeds, UK, andIndian Institute of Management Udaipur, Indiae.rose@leeds.ac.uk
elizabeth.rose@iimu.ac.in

I have long been fascinated by Japan,
especially as a business context. My interest inJapanese business began with my exposure to thequality management perspective, first as an engineer
at Ford Motor Company, and later, as a young
academic, having had the good fortune to interact
with – and learn from – Professor W. Edwards
Deming. Starting with a focus on the statisticalaspects of quality control (which was logical, giventhat my PhD was in the field of statistics), I was
drawn in by the managerial considerations and theirclear connection to all aspects of business, frommanaging
individuals
todeveloping
andimplementing international strategy. As I became
more interested in strategic management andinternational business, a long-term collaboration withProfessor Kiyohiko Ito (e.g., Ito & Rose, 1999, 2010;
Rose & Ito 2008) enabled me to develop a deeper
understanding of various aspects of the strategies
employed by Japanese firms, especially large
multinational enterprises (MNEs). Professors

Kazuhiro Asakawa, D. Eleanor Westney, Ito, and I
have also studied internationalization within theJapanese service sector (e.g., Asakawa, Ito, Rose, &Westney, 2013).
This stream of research has afforded me somecredibility with respect to Japanese business, and I
was honored to serve as President of the Associationof Japanese Business Studies during 2009-2011.
However, I am deeply aware that I am very far frombeing an expert on Japan and its business context!
Among other things, not speaking – or understanding,or writing – the Japanese language means that I will
always be an outsider, unable to comprehend a great
many of the critical subtleties that characterize thisenvironment. This is, of course, my loss. It alsomeans that my observations are very much those ofanoutsider
who
lacks
deep
contextual
comprehension.
The high contextualization that characterizes
Japan means that deep understanding can only be

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developed with real embeddedness, which can only
develop over a long time. Insightful researchpertaining to how Japanese businesses operatedemands such deep understanding. There are many,
many aspects of Japanese business that are
extremely relevant to global scholars, but remain
under-investigatedandpoorlyunderstood,
especially outside of Japan. This means that theunder-representation of Japan-based scholars as
authors of articles in international business andmanagement journals is problematic, andimpoverishes the international dialogue in business,management, and strategy research. While much ismade of the specificity of the Japanese businessenvironment, I believe that Japan represents aremarkable context in which to study a great many
globally applicable phenomena.

How does studying Japanese firms shed light on
fundamental issues in international management
and strategy?
What follows are some examples of some of
the many universally-relevant topics that can readily
be studied in the Japanese business environment.
The fact that these suggestions are being made byan outsider effectively guarantees that thiscollection of research areas is far from exhaustive,
but I hope that they will generate some ideas anddiscussion.
One obvious issue pertains to understanding
the development of high-quality manufacturing
processes, from controlling quality to managing
inventory. This was an important contributor to theremarkable international impact of Japanese MNEs
in the manufacturing sector in the 1970s and 1980s,
but the lessons remain salient, as manufacturers
around the world face increasingly global
competition and emerging-market multinationals(EMNEs) are becoming ever more substantial
contributors to world trade. How have thesestrategies evolved over time? What are the benefits

JAPAN MNE Insights
and limitations associated with the managerial
approaches that led to Japanese MNEs’ leading
positions with respect to the management of quality
in manufacturing? What aspects facilitate or hinder
the implementation of these managerial approaches
in other institutional contexts, including emerging
markets?
Issues pertaining to organizational structureoffer another fruitful line of inquiry. The covid-19
pandemic is leading to rethinking of many aspectsof how people work, which is likely to have
implications for how organizations are structured.
In many countries, organizational structure tends tobe very hierarchical, and the popular press regularlyraises the issue of the huge disparity between the
remunerations of top executives and workers –especially when many workers find it difficult tosurvive financially in spite of multiple jobs and very
long hours of work. In contrast, large Japaneseorganizations tend to have relatively flatorganizational structures; this is more consistent
with the increased autonomy associated with the
pandemic-induced shift to remote working. As such,the long experience in Japan of managing within
relatively flat organizations has considerable
currency. The Japanese experience is especiallyinteresting, as it takes place in the context of arather hierarchical society, unlike, for example, thesocial context of the Nordic countries, where flatorganizational structures are also the norm. Whatcan organizations around the world learn from thiswealth of experience, and how might this relate to
the future of work? What are the challenges
associated with transferring this structure to othercontexts in the process of engaging in foreign direct
investment? Of course, flatter organizational
structures do not represent a panacea. What light
does the Japanese experience shed on both thebrighter and darker sides of human resource
management, both domestically and internationally?
Japan also offers an excellent opportunity
for researchers to develop a deeper understanding of2

JAPAN MNE Insights

Vol.7 Issue 1
the impact of national context on how firms operate,
grow, and internationalize. This has particularsalience for many emerging economies. First, thenature of Japan’s industrial organization –specifically, the impact of zaibatsu and keiretsu
duringperiodsofimportanteconomic development – hasparallels in the business groups thatare prevalent in many emerging anddeveloping economies (e.g., China,
India, Indonesia, and much of Latin
America). While there is a growing
academic literature pertaining tobusiness groups in emerging“

approaches to many aspects of the business, fromdesign to managerial practices. The Japanese
government (e.g., MITI) played an important role inthis growth, which was coincident with a shift fromcompeting on the basis of low cost to competing onWith government support for key industries, Japanesefirms learned, very quickly, how to become
internationally competitive – and, in many cases,
dominant. It is interesting to see that, albeit with adifferent approach to government support, many Chinese
firms have been replicating this internationalization pathover the past several decades.”markets, remarkably few of these articles evenmention zaibatsu and keiretsu. In the Japanesecontext, the role of the sogo shosha is of particularinterest. There is little doubt that the trading
companies’ knowledge and experience haverepresented a key intangible resource for Japanesefirms, especially during times of building aninternational presence early in the 20th century andthen rebuilding international engagement during thepost-war era. These highly-internationalized firms’
long histories, including collapses, mergers, andrebranding, offer a rich context in which to study
industry dynamics. Another aspect of interest,
especially for emerging markets, concerns the rapid
and effective internationalization of Japanese firms
during the second half of the 20th century. In 1948,
Japan’s share of global exports1 was 0.44%; this rose
to 9.86% by 1986. (For comparison, China’s figures
were 2.04% in 1991 and 14.74% in 2020.) These
export statistics, though, are unable to reflect the
global impact of Japanese MNEs during the 1970s
and 1980s. Working in the U.S. automotive industry
from 1977 to 1981, I observed, first-hand, howleading Japanese firms were able to disrupt thepassenger car market and force the major U.S. carcompanies to scramble to attempt to change their

the basis of innovation and high quality. With
government support for key industries, Japanese firms
learned, very quickly, how to become internationallycompetitive – and, in many cases, dominant. It isinteresting to see that, albeit with a different approachto government support, many Chinese firms havebeen replicating this internationalization path over the
past several decades. However, the Japaneseexperience should arguably be more informative forother countries seeking to facilitate their domestic
firms’ entry into international markets, given thespecificity of China’s economic system. In addition,
Japanese MNEs’ well-documented focus on using
internationalization as an opportunity for learning(e.g. Hamel, Doz, & Prahalad, 1989) provides what I
believe to be a very useful example for firms fromother countries that are in earlier stages ofapproaching global markets.
The Japanese context also represents areasonably extreme condition with respect topopulation demographics, which presents a challenge
for both MNEs and domestic firms. Japan is certainly
not alone among developed nations in terms of anaging population; while much higher than mostemerging and developing markets, the median age of

1 Data are sourced from www.unctadstat.unctad.org.
2 Data are sourced from United Nations, Department of Economic and Social Affairs, Population Division (2019). International Migration 2019:
Report (ST/ESA/SER.A/438).
3 Data are sourced from https://data.oecd.org/pop/fertility-rates.htm .
4 Data are sourced from https://data.oecd.org/pop/working-age-population.htm .
5 See https://www.ef.com/wwen/epi/regions/asia/japan/ .

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Vol.7 Issue 1
its population is not substantially different to that ofmany countries in Europe. However, Japan’s long life
expectancy, when combined with its low level ofimmigration, makes it something of an outlier withrespect workforce demographics. As of 2019, Japan’s
proportion of foreign-born residents was 2.0%, which
is a bit below the worldwide average of 3.5%2.
Stratifying by the level of economic development,
though, clarifies Japan’s outlier situation. The 2019
proportions of foreign-born residents in high-income
and low-income regions were 14.0% and 1.9%,
respectively. Comparable figures are 11.0% forEurope, 16.0% for Northern America, and 21.2% for
Oceania. As such, Japan’s combination of long life
span, relatively low fertility rate (1.36% in 20193),
and low immigration levels means that the available
workforce is constrained; 59.7% of Japan’s
population is of working age, compared to 72.8% forSouth Korea4. Many OECD countries areexperiencing declines in their working-age
populations, but the more extreme nature of thedemographic situation in Japan means that Japanesefirms are at the forefront of developing approaches todealing with this challenge.

JAPAN MNE Insights
While there are, of course, counter-examples(including the inherently international sogo shosha,
the construction industry, Kumon, and the globallypopular anime), the bulk of Japan’s service providers
retain a strongly domestic focus. This is particularly
noteworthy in light of the astonishingly highstandards of service that are prevalent in Japan,
relative to so many other countries (e.g., Johansson,1990). Why have these high-quality offerings notbeen internationalized more extensively? Are they too
deeply embedded in the Japanese context to crossborders effectively and profitably? Clearly, context is
more critical for the delivery of services, relative tomanufacturing, given the inherent involvement of thecustomer in the “production” process. Studying thisissue among Japanese service firms may provide
valuable insights into the impact of context onservice-sector internationalization.
On a more macro level, Japan offers theopportunity to understand more about how MNEs
deal with the need to remain profitable during asustained slowdown in their domestic economic
environment. While the duration of its ongoing

economic doldrums is severe, Japan isextremely unlikely to be the only
economy that experiences rapid growth
On a more macro level, Japan offers theand then sharp decline. How does
opportunity to understand more about how
Japan’s historical experience of
MNEs deal with the need to remain profitablebuilding and rebuilding its economy
during a sustained slowdown in their domestic inform firms’ behaviors? What lessons
economic environment.
can be derived from the manner inwhich Japanese MNEs are managing
Considering another issue, the vast majority of under such challenging circumstances?
research pertaining to MNEs considers the
Finally, the extensive international reach of
manufacturing sector. To date, our knowledge
Japanese firms provides a fascinating context inpertaining to the internationalization of services iswhich to study how MNEs deal with issues ofrelatively underdeveloped, despite the growing
language in their organizations. Despite the widelyimportance of services in the context of global trade.
publicized example of Rakuten’s adoption of English
Here, again, studying Japanese firms offers theas lingua franca across its international operations,potential for interesting insights. While Japanese
this is not the norm – nor is this this approach without
manufacturing
MNEs
have
internationalized
challenges, as the mandated use of a second language
extremely successfully, firms in Japan’s service
may reduce the richness of communication within the
sector have been much less active away from home.

“

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Vol.7 Issue 1
organization (e.g., Neeley, 2012). At the same time,
there is evidence that English-language proficiency is,
on average, declining in Japan5. Given the widespreaduse of English in international business, this suggeststhat many Japanese MNEs continue to makeextensive use of “parallel organizations” in which
regular communication between subsidiaries andheadquarters is largely the responsibility ofsubsidiary-based expatriates, who then transfer
information to local (host-country) employees. Thisis, of course, not a uniquely Japanese phenomenon,
but interferes with open communication in a different
way. The extensive internationalization of Japanesefirms, combined with the relatively low comfort levelof many Japanese citizens with English, offers realpotential for developing insights into the impact oflanguage on firms’ international operations.

Conclusion
Research in the field of international businessplaces strong emphasis on context. While all national
contexts have unique attributes, there is no doubt thatJapanese MNEs operate in an environment that has
many distinctive characteristics. That said, many ofthese distinctive characteristics allow for the study ofsome core, general issues in situations that are closer
to boundary conditions than can be found in othercountries, offering the potential for the developmentof particularly deep theoretical and empirical insights.
This potential is greatly enhanced by two
additional – and interrelated – attributes of Japan: astrong sense of history and an appreciation of thevalue of detailed business-related information. Japan
has always struck me as a data-rich nation. As
someone whose work is primarily quantitative, I am
consistently in awe of the ready availability of highquality data to facilitate research pertaining to various
aspects of Japanese MNEs. The value attributed tohistory means that valuable longitudinal research ispossible, more so than in many other nations.

In summary, I see so much potential in theJapanese context for investigating theoreticallyinteresting, globally applicable questions pertaining to
MNEs and internationalization. However, doing thiswell demands that researchers truly understand thecontext, and that is extremely difficult for researchers
who are not deeply embedded in that context. Thismeans that we need to hear more of the voices ofJapan-based scholars.

References:
Asakawa, K., Ito, K., Rose, E.L., & Westney, D.E.
(2013). Internationalization of the Japanese service
sector. Asia Pacific Journal of Management, 30:
1155-1168.
Hamel, G., Doz, Y.L., & Prahalad, C.K. (1989).
Collaborate with your competitors and win.
Harvard Business Review, January-February: 133139.
Ito, K. & Rose, E.L. (1999). Innovations andgeographic focus: A comparison of U.S. andJapanese firms. International Business Review,
8(1): 55-74.
Ito, K. & Rose, E.L. (2010). The implicit returns on
domestic and international sales: An empiricalanalysis of cross-subsidization. Journal ofInternational Business Studies, 41(6): 1074-1089.
Johansson, J.K. (1990). Japanese service industries
and their overseas potential. Service Industries
Journal, 10: 85-109.
Neeley, T. (2012). Global business speaks English:
Why you need a language strategy now. Harvard
Business Review, 90(5): 116-124.
Rose, E.L. & Ito, K. (2008). The international
investment patterns of Japanese automobile
manufacturers. Journal of International BusinessStudies, 39(5): 864-879.

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Vol.7 Issue 1

Special Essay:
Thoughts on Japanese Corporate Support Measuresin the Context of Covid-19
Shingo Nishii, Ph.D.
Professor of International Business and Regional Innovation
Graduate School of Social Sciences,
Department of Professional Business,
Regional Innovation Course,
University of Hyogo, Japannishii@mba.u-hyogo.ac.jp

Introduction
As of this writing (early June 2021), COVID19 vaccination coverage (at least one dose) has
reached about 20% of Japan’s total population, andvaccination coverage of the elderly (65 years andolder) has reached over 50%. Vaccination in
workplaces and universities has also started, and its
expansion is proceeding at a rapid pace. The state of
emergency, which had been extended for a long time,
has been lifted except in Okinawa Prefecture.
Although the situation remains unpredictable due tothe risk of rebound and the appearance of new mutant
strains of COVID-19, the "new normal" in social life
is progressing.
On the other hand, in terms of economic
activities, restrictions are still in place, and the impact
of COVID-19 is enormous. In particular, its effect on
small and medium enterprises (SMEs), which are said
to support Japan's economy and society, is extremely
serious. According to a questionnaire survey1
conducted by the Japan Broadcasting Corporation(NHK), Japan's public broadcaster, and the Dai-ichi
Life Insurance Company, Limited, a major life
insurance company (published on January 14, 2021),
68% of the SMEs that responded noted decreased

sales (compared to before COVID-19’s spread).
Twenty-nine percent said that their sales had
decreased by about 30%, and 17% said that theirsales had fallen by more than 50%. The impact
was particularly large in the accommodation andfood services industries. Two out of every threecompanies in the accommodation industry and oneout of every two companies in the food andbeverage service realm responded that theirbusiness had decreased by 50% or more.
In response, the Japanese government has
taken a number of measures. Several subsidies
were provided as immediate measures. Now, rather
than another COVID-19 emergency measure, the"Business Restructuring Subsidy" has been
introduced to respond to the economic and socialchanges of the COVID and post-COVID era and topromote the structural transformation of theJapanese economy.2 The subsidies are directly
targeted at SMEs and medium-sized enterprises(MSEs)3 to help them restructure their businesses.
Simultaneously, the subsidies will contribute toraising and expanding the effectiveness ofmanagement support organizations, management
consulting services, and other management-related

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professional services in Japan.
The purpose of this paper is to introduce
business restructuring subsidies as one of the latest
Japanese corporate support measures in the COVID19 disaster and then to make observations about
management support organizations and theprofessionalization of existing services in Japan.
In writing this paper, the author interviewed
Dr. Toshiki Matsuura, Chief Coordinator of the
Hyogo Prefectural Federation of Small Business
Associations,4 one of the major public management
support organizations in Hyogo Prefecture5 and thelocation of the university with which I am affiliated.
Dr. Matsuura worked at a financial institution before
joining the organization and has been involved in
front-line management support services for almost
30 years. He is a certified Small and Medium-sizedEnterprise Management Consultant and has adoctorate in business administration (specializing in
intellectual asset management). The explanations
anddiscussionsofmanagement
supportorganizations and regional financial institutions
below are based mainly on interviews with Dr.
Matsuura and the materials that he provided. I would
like to express my gratitude to him.
Overview of Business Restructuring Subsidies
Background on the Creation of BusinessRestructuring Subsidies
According to the Small and Medium
Enterprise Agency (SME Agency), the backgroundof business restructuring subsidy creation is basedon the perception that Japanese companies are "nolonger doing anything new." According to an OECD

JAPAN MNE Insights(2017) survey, among developed countries, thepercentage of companies in the manufacturing andservice industries that have introduced new products
and services is lowest in Japan.6 Similarly, the ratiosof capital investment and R&D expenditures tooperating income have continued to decline forJapanese companies. On the other hand, companies'
retained earnings are increasing, and these firms
tend not to invest their profits.7
In addition, the SME Agency mentions thetransformation of keiretsu-style transactions. To put
it bluntly, until now, the top companies in the chain
have been its "brains,” constructing the big picture
strategy, while the companies at the lower levels,
especially the SMEs at the end of the chain, have
only had to follow orders from the top companies.
Protected by and dependent on supply chains
centered on large corporations, it was sufficient toconsider only reactive tactics. However, the
COVID-19 epidemic has made it impossible tomaintain affiliative transactions (because of theslumping performance of top companies, thecollapse of certain industries). The SMEs that canno longer rely on these conventional transactions
have been forced to transform themselves, change
their business models, and so on.8 More specifically,
the SME Agency believes that this situation has
been developing since Japan's population began topeak and that COVID-19 has brought its effects to ahead in specific industries.
The
Objectives
andMain
Screening
Requirements for Business Restructuring
Subsidies

1 For more information, see “COVID-19 Impact on SMEs in Data,” (https://www3.nhk.or.jp/news/special/coronavirus/economic-indicators/detail/detail_14.html.)
2 The following description of "business restructuring subsidies" is based on the contents of the official website of the Small and Medium Enterprise
Agency's "Business Restructuring Subsidies" (https://jigyou-saikouchiku.jp/) and the materials downloadable from the same website. As the Englis
h version of the website is not yet available, the Japanese to English translation was made by the author.
3 In this paper, SMEs and MSEs are used separately. According to the regulations for business restructuring subsidies, the scope of SMEs includes"manufacturing and others" (companies with capital of 300 million yen or less or companies and sole proprietorships with 300 employees or less),"wholesale" (companies with capital of 100 million yen or less or companies and sole proprietorships with 100 employees or less), "retail"(companies with capital of 50 million yen or less or companies and sole proprietorships with 50 employees or less), and "service" (companies withcapital of 50 million yen or less or companies and sole proprietorships with 100 employees or less). The scope of MSEs is companies that do not fallwithin the scope of SMEs and have capital of less than 1 billion yen.
In addition, so-called "deemed large companies" such as subsidiaries of large companies are not eligible for support.

7Vol.7 Issue 1
The purpose of the business restructuringsubsidy, which was created against this background,is to promote structural transformation of theJapanese economy by supporting the drastic
business restructuring of SMEs, and responding to
the economic and social changes of the COVID andpost-COVID era. The program targets SMEs,
MSEs, sole proprietors, business associations, etc.,that are experiencing difficult business conditions
due to COVID-19. Several rounds of public
solicitation are expected, and at this point, the firstround of public solicitation has already been
completed and the adoption results have beenannounced. The adoption rate for the first round of
applications was 36%, which is very low compared
to existing subsidies, making the selection processthat much more difficult.
The three main screening requirements are
as follows. The first requirement is a decrease insales: the total sales for any three consecutive sixmonth periods after October 2020 must havedecreased by at least 10% compared to the total
sales for the same three-month period before the
COVID-19 epidemic (January-March 2019 or2020). Secondly, the company is committed tobusiness restructuring. Applicants must developJAPAN MNE Insights
new business fields, change business categories, orchange businesses or industries following thebusiness restructuring guidelines. Third, applicants
are required to develop a business plan for businessrestructuring with a certified management innovation
support organization. For projects where the amountof subsidy exceeds 30-million-yen, financial
institutions (banks, credit unions, funds, etc.) mustalso participate in creating the business plan. If thefinancial institution also serves as a certified
management innovation support organization, only
financial institution participation is required. Then,the applicant must formulate a business plan toachieve an average annual increase of at least 3.0%
in value-added (5.0% in the case of the global Vshaped recovery framework) or an average annual
increase of at least 3.0% in value-added per
employee (5.0% in the case of the global V-shaped
recovery framework) within three to five years after
the completion of the subsidized project.
Budget Amount and Application Quota
The budget for business restructuring subsidy
is 1,148.5 billion yen, which is more than 10 times
larger than other typical subsidies such as"Monozukuri subsidies”9 (about 80-100 billion yen).

4 The National Federation of Small Business Associations is the leading organization for SME support in Japan, with one organization in eachprefecture. For more information, please visit the official website (https://www.chuokai.or.jp/index.aspx).
5 Hyogo Prefecture is located in the middle of Japan and has a population of about 5.4 million with Kobe City, famous for its "Kobe Beef,” as the prefectural capital.
6 According to the survey, the percentage of companies that have introduced new products and services (2012-2014: the percentage of companies that responded to a questionnaire for companies that said they introduced new products and services (including the addition of new functions or significa
nt improvements in usage) in 2012-14) in the manufacturing industry is, in descending order, Germany (18.8%) Italy (17.8%), the US (12.7%), the U
K (12.7%), and Japan (9.9%). Similarly, in the services sector, Italy (12.2%), the UK (10.1%), Germany (9.0%), the US (7.6%) and Japan (4.9%). Th
ese data are based on OECD (2017), the OECD Science, Technology, and Industry Scoreboard 2017. This data is included in a handout of the Future
Investment Council, Headquarters for Japan's Economic Production, Prime Minister's Office, September 19, 2030 (https://www.kantei.go.jp/jp/singi/
keizaisaisei/miraitoshikaigi/dai30/siryou2.pdf).
7 It is said that Japanese companies have over 400 trillion yen in retained earnings. The ratio of capital investment and R&D investment to corporate
operating profit (Japan-U.S. comparison, indexed at 100 in 2011) is 115 in the U.S. and 85 in Japan for capital investment/operating profit, and 131
in the U.S. and 74 in Japan for R&D investment/operating profit in 2018. The original data is based on the Ministry of Finance's "Corporate Business
Statistics," the Ministry of Economy, Trade, and Industry's "Basic Survey of Business Activity," the U.S. Census Bureau's "Quarterly Financial
Report," and "Business Research and Development and Innovation" by the National Science Foundation. The same data is included in a handout of
the Future Investment Council, Japan Economic Production Headquarters, Prime Minister's Office, September 19, 2030
(https://www.kantei.go.jp/jp/singi/keizaisaisei/miraitoshikaigi/dai30/siryou2.pdf).
8 According to a survey conducted by the SME Agency (an online questionnaire survey of large and small companies conducted from October 5-12,
2020, and December 1-9, 2020; the questions were: "What was the level of your company's sales in November of this year (2020) when the samemonth last year was 100? According to the survey (conducted by 7,968 companies), the distribution of changes in November 2020 sales compared tothe same month of the previous year shows that 23% of the companies answered "increased.” It can be assumed that these companies’ existing
business relationships are being maintained. On the other hand, the percentage of companies that answered "decreased by 20% or more" to"decreased by 90% or more" reached 32%. For more information, see the SME Agency's video explaining business restructuring subsidies(https://www.youtube.com/watch?v=VLiIpDcbgbs).

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Vol.7 Issue 1
For SMEs, there are two types of subsidies:"Regular Quota" and "Graduation Quota." Thesubsidy amount for the Regular Quota ranges from 1
million yen to 60 million yen, and the subsidy rate is
2/3. The Graduation Quota is limited to 400
companies and is a special quota for businesses thatwill grow from SMEs to MSEs by increasing capitaloremployees
through(1)
organizational
restructuring, (2) new capital investment, or (3)global expansion within the business plan period.
The subsidy amount is from over 60 million yen to
100 million yen, and the subsidy rate is 2/3.
For MSEs, there are two types of subsidies:“Regular Quota” and “Global V-shaped Recovery
Quota.” In the Regular Quota, the subsidy amount is
between 1 million yen and 80 million yen, and thesubsidy rate is 1/2 (1/3 for companies over 40 millionyen). The Global V-Shaped Recovery is limited to
100 companies and is a special program for mediumsized companies that meet all the following
requirements. (1) Medium-sized companies whose
total sales for any three consecutive months after
October 2020 have decreased by 15% or morecompared to the total sales for the same three months
before the COVID-19 epidemic. (2) The formulationof a business plan to achieve an annualized increaseof at least 5.0% in value-added or value-added per
employee over the next three to five years after theend of the subsidized project. (3) The project must bea global expansion project. The subsidy amount isfrom over 80 million yen to 100 million yen, and thesubsidy rate is 1/2.

JAPAN MNE Insights

The Process from Business Plan Development to
Subsidy Payment and Follow-up
The review of subsidies is based on thebusiness plan.10 To be chosen, it is necessary to
formulate a “reasonable and convincing” businessplan. In addition, the business plan must be
formulated in consultation with a certified business
innovation support organization. Certified business
innovation support organizations are also expected toprovide advice and follow-up at the business
implementation stage.
The key points that should be included in thebusiness plan are as follows:-The current business of the company, its strengths
and weaknesses, opportunities and threats,business environment, and the need for businessrestructuring.
-Specific details of the business restructuring(products/services to be provided, equipment to beinstalled, construction work, etc.).
- Market conditions for the business restructuring,the company's advantages, pricing, issues andrisks, and their solutions should also be provided.
-Implementation structure, schedule, financing
plan, and profit plan (including increased valueadded).
Certifiedmanagement
innovation
supportorganizations are organizations authorized by the
Minister of Economy, Trade, and Industry to be

9 The official name of the subsidy is "Subsidy for Promotion of Productivity Improvement in Manufacturing, Commerce and Services.” It is a
subsidy given to SMEs for capital investment in management innovation. For more information, please refer to the official website of the
Monozukuri Subsidy (https://portal.monodukuri-hojo.jp/about.html).
10 The definition of business restructuring is "business activities of small and medium-sized enterprises, etc. based on a plan to develop a new field,change business, change industry, change business category, or reorganize business," and the details are stipulated. For more information, please ref
er to the Business Restructuring Guidelines authored by the SME Agency (https://jigyou-saikouchiku.jp/pdf/shishin.pdf).
11 The Small and Medium Enterprise Management Consultant is a national qualification (but not a business exclusive qualification) and is the only
public qualification for management consultants in Japan. According to the National Qualification Difficulty Ranking
2017(https://www.manegy.com/news/detail/573), the pass rate is 4.2% (21.7% pass rate for the first exam, 19.4% pass rate for the second exam). It
is a highly difficult qualification to obtain. Holding this certification is not necessarily a prerequisite for providing management consulting services,
but it is often a prerequisite for receiving requests from public institutions and for performing policy-related work. In addition, certified business
innovation support organizations are required to have specialized knowledge of taxation, finance, and corporate finance (in the case of corporations,tax accountant corporations, audit corporations, and law firms), or to have at least three years of practical experience in supporting small andmedium-sized enterprises, including at least one year of practical experience in statutory business. In terms of qualifications, tax accountants musthave at least three years of work experience, including at least one year of work experience in legal services, in support of small and medium-sizedbusinesses. In terms of qualifications, certified tax accountants, lawyers, certified public accountants, and the Small and Medium EnterpriseManagement Consultant are equivalent. For more information, see the SME Agency's website on "Authorized Support Organizations"(https://www.chusho.meti.go.jp/).

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capable of supporting SMEs. More than 30,000
financial institutions, support groups, tax accountants,
and certified Small and Medium-sized EnterpriseManagement Consultants have been certified
throughout Japan.11
The subsidy will be paid only after confirmation of
expenditures by the project. The business plan mustbe followed up even after the end of the subsidy
period. Annual reports on business status, etc., arerequired for five years after the subsidized project
ends.
Reference Examples of Business Restructuring
The SME Agency has introduced thefollowing examples as reference cases for businessrestructuring. In an example of manufacturingindustry use (the development of new businessfields), a company manufactured aircraft parts before
the COVID-19 epidemic. However, demanddecreased due to COVID-19’s impact, so the firm
disposed of related equipment in some of its
businesses as part of business development, launchinga new venture that manufactures medical equipment
components. In this case, the subsidy covers the costof equipment removal for business compression, thecost of introducing new equipment for manufacturing,and the cost of training for employees engaged in the
new business. In an example of retail industry use(change of business category), a company was
operating a men's clothing sales business before
COVID-19, but sales declined due to its impact.
Exemplifying this change of category, the company
reduced its store operations and converted to an
online men's clothing sales and rental business. In thiscase, the subsidy covers the cost of renovating thebuilding because of the store’s downsizing and thecost of building a system to introduce new online
services. The SME Agency has introduced more thana dozen reference cases to create an image of“business restructuring.”
This is the outline of the businessrestructuring subsidy. Again, its purpose is to promote
the structural transformation of the Japanese economy

JAPAN MNE Insights
by supporting drastic business restructuring of SMEs
and MSEs to cope with the economic and socialchanges of the COVID and post-COVID eras. The
subsidies are "support for the potential" of SMEs andMSEs and provide opportunities for SMEs and MSEs
to embark on transformations, business restructuring,and business model changes that they have been
unable to undertake on their own.
The Networking of Management Support
Organizations and Professionalization of Existing
Services
The Relationship Between Management Support
Organizations,
Professional
Services,andSubsidies
As mentioned above, to apply for a businessrestructuring subsidy, it is necessary to work with acertifiedmanagement
innovation
supportorganization. Although circumstances vary dependingon the applicant's corporate size (amount ofmanagement resources) and management capabilities,
it is often difficult for applicants to develop a"reasonable and convincing" business plan using theircapabilities alone. In particular, it is very difficult for
SMEs and MSEs, which have not continuously
conducted strategy formulation and business analysis,
to explain each item required in the application
guidelines adequately. The same is true for follow-up.
Even if the project is successfully adopted, it is aheavy burden for the applicant to implement thebusiness plan and conduct self-assessment smoothly.
Therefore, applicants need to make good useof various professional services related to
management, including certified business innovation
support organizations, not only for the formalities ofapplying for the subsidies but also for the
implementation of the subsidized projects andbusiness restructuring. In other words, in Japan,
subsidy projects are one of the main businessactivities for professional services related to
management. They are also a source of income forprivate professional service firms. To put it anotherway, the emergence of subsidies for business10Vol.7 Issue 1

JAPAN MNE Insights

Figure 1: Shikkaiya Chuokai’s Network Structure

Source: Prepared by the author based on materials provided by Dr. Matsuura. The blue dotted arrows indicate the specialized fields inwhich each management support organization specializes. Institutions that work particularly closely with “Shikkaiya Chuokai” include
the Hyogoken Credit Union, Danyo Shinyo Kumiai Bank, and Shoko Chukin Bank (Kobe, Himeji, and Amagasaki). Similarly,
institutions with a relatively high degree of cooperation are marked in blue.

restructuring is forcing existing professional
management services to innovate as well.
Networking of Existing Management Support
Organizations
As an example of innovation in existing
management support organizations, consider a casestudy of the networking of management support
organizations in Hyogo Prefecture (Figure 1).
Although there are many management support

organizations in Hyogo Prefecture, they have been
providing their services in accordance with the
purpose for which each organization was established.
As a result, it was difficult for the end-user, thebusiness owner, to understand the differences(characteristics and areas of expertise) between theorganizations, making it difficult to determine which
one would be appropriate to consult.
To improve this situation, the Hyogo
Prefectural Federation of Small Business Associations

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Figure 2: Degree of Thoroughness of Business Evaluation (Business Model)
Thoroughness
Level 4:
Business Consulting

ExampleProvide consulting services (for a fee) to support core businesses at a level that contributes tothe services and added value of client companies, such as through improving sales andoperations.
- Utilize industry-specific knowledge accumulated through past support for local industries.
- Focus on training experts, including industry alumni and those with experience insecondment.
- Consulting know-how is still being strengthened with monthly reviews by external
consultants.
Level 3:
Provides consulting services (for a fee) focusing on business revitalization/BS improvement,
Financial Consulting medium-term management planning, etc.
-Focusing on low-rated companies, based on a large number of past business turnarounds.
-Leverage the size of the bank to provide a broad lineup of solution services through agenerous headquarters structure.
Level 2:
Provide (relatively simple and practical) consulting services (for a fee) based on the bank's
Financial Service
know-how in ICT, human resource systems, management enhancement, etc.
-Utilize the know-how gained from introducing ICT and improving business efficiency.
Offering a menu of proposals centered on outsourcing and providing a “full range ofmanagement consultation.”-Supplementing the lack of resources and know-how of our own bank through externalalliances.
Thoroughly implement sales activities that emphasize contact points through frequent visits
and information accumulation.
-Leverage our experience in relationship banking led by the field.
-Focused on frequent visits to all business partners and the creation of a database of thevast amount of qualitative information obtained through these visits.
Providing fee-based business matching for sales support-To improve our presence in the prefecture, we specialize and focus on the sales support(business matching) that our customers would be most pleased with.
Level 1:
Preparation of business evaluation sheets onlySame as before-Although the sheet has been prepared, proposals are yet to be made.
-Only as a document attached to the approval process.
Source: Based on Kanazawa et al. (2018), p. 6, with some notations modified by the author.

(the Japanese name is Hyogo Chusho Kigyo Dantai
Chuokai) has named itself Shikkaiya Chuokai and has
been working on networking for about 10 years. The
name Shikkaiya is derived from the Japanese kimono
industry, which has been in existence since the Edo
period (1603-1868) and deals with traditional
Japanese clothing and the fabrics used for kimonos.
The word shikkai means "everything and anything,"and shikkaiya means an organization that "consults on
any matter related to the kimono.” It is a producer andcoordinator of various processes, such as those related
to kimono dealers, customers, dyers, tailors, dyeing,
and washing.
Therefore, the term Shikkaiya Chuokai
represents the intention to provide one-stop
consultation for business owners. Through the
Chuokai, business owners who have problems cancollaborate with support organizations and specialists
suitable for solving their problems. Looking at it theother way around, the Chuokai’s consultation does
not solve the problems of business owners in a partial
manner but sees them as comprehensive problemsolving projects. It works to optimize theircapabilities based on cooperation with various
support organizations.
The Professional Servitization of Regional
Financial Institutions
According to Dr. Matsuura, in parallel withthe development of this network of business support
organizations, Japan's regional financial institutions
have in recent years begun to offer more and more
professional services. Until now, the business model

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Vol.7 Issue 1of Japan's regional financial institutions has been
based on the "deposit and loan" model, i.e., collecting
deposits and lending them out. However, theshrinking of local economies due to the declining
birthrate and aging population, as well as the effectsof long-term low-interest-rate policies, mean that theold business model is about to collapse. As a result,
there is a great deal of interest in creating a new,sustainable business model for regional financial
institutions.
The key to this new business model is theconcept of "business evaluation.”12 The conceptbehind business evaluation is to "perform financial
intermediaryandconsulting
functionsbyappropriately evaluating a company's business andgrowth potential without relying on collateral or
guarantees from the client.” According to the survey
by Kanazawa et al. (2018), there are four businessmodels (four levels) regarding the thoroughness ofbusiness evaluation (Figure 2).
Level 1 is the same as before, althoughbusiness evaluation sheets are prepared, businessissues are not shared with customers, which isrelatively an extension of conventional lendingtransactions. Level 2 is the level of financial services,
the company has a menu of finance-related solutions,such as M&A, business succession, and businessmatching. Level 3 is the level of financial consulting,which means that although it does not improve theprofitability of the core business, it provides full-scaleconsulting services such as balance sheet
restructuring and support for the formulation of
medium-term management plans, utilizing its
screening capabilities and financial intermediaryfunctions as a financial institution. Level 4 is the levelof business consulting. In addition to grasping theclient company's business situation, they canpenetrate the client company's internal realities, suchas marketing and business operations, and makeproposals to contribute to the client company's
services and added value itself, such as sales

JAPAN MNE Insights
improvement and cost structure.
Considering this in relation to the subsidies
mentioned in the previous section, it is difficult toprovide substantial support in formulating a businessplan unless the company has reached at least Level 3.
More specifically, unless a company can provide
Level 4 services, it cannot be called a competitive
professional service.
Conclusion
In this paper, I have introduced businessrestructuring subsidies. These large subsidies are
currently attracting very high expectations. I also
made some observations on changes in management
support organizations and their professional services
in Japan.
Subsidies are often ridiculed as being
ineffective and useless for structural reform. On theother hand, as the SME Agency has stated, it is also
true that it is exceedingly difficult for troubled SMEs
and MSEs to innovate and build new business models
through self-help efforts alone. In particular, in thecurrent COVID-19 disaster, survival is the top
priority, and most companies probably do not havetime to innovate their business models. This is why
business restructuring subsidies are so significant.
However, I only hope that the subsidies will not end
up being a one-time, temporary measure.
In addition, I would like to emphasize that, inpractice, the true strength of a company does notdepend solely on its capabilities. As introduced in thispaper, the competencies of the various support
organizations and professional service firms that
support the company in question are equallyimportant, and the parallel development of thesemanagement support industries will lead to thestructural transformation of the Japanese economy.
Dr. Matsuura emphasizes the importance of the"ability to be supported.” This has two meanings.
First, it is important for managers to make good useof support organizations and professional services.

12 "Business evaluation" has been advocated by the FSA since around 2014. Regarding the survey results described below, I refer to Kanazawa(2018).

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Vol.7 Issue 1

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Secondly, it means that each support organization
should develop the ability to be sustained by othersupport organizations.
The author has long advocated thesignificance of studying the professional services
industry, both from academic and practicalperspectives. Due to confidentiality restrictions, it isdifficult to make it a research subject, but in reality,
many companies are using the help of various
management support organizations and professional
service firms in their business activities.
At first glance, what has been introduced inthis paper may not seem to be directly related to theactivities of MNCs. Still, the author believes that it isan especially important point of discussion in terms of
the importance of location as the home of MNCs anda source of competitive advantage in discussion ofindustrial clusters. I would like to discuss therelationship between the management support
industry and multinational corporations in anotherpaper.
References
Japan Economic Revitalization Bureau, Cabinet
Secretariat(2019).
“Kiso
Siryo(BasicInformation)”(https://www.kantei.go.jp/jp/singi/keizaisaisei/mira
itoshikaigi/dai30/siryou2.pdf)
Kanazawa, K., Tomita, N., Inaba, M., Inada, M.,
Shimizu, Y. (2018). Kinyu kikan ni yoru Jigyosei
hyoka no Teityaku ni muketa Saisanka ni kakaru
Bunseki Kousatsu (Analysis and discussion on
profitability for the establishment of businessevaluation by financial institutions). FSA Institute(Financial Research Center, Financial Service
Agency, Government of Japan) Discussion Paper
Series, DP 2018-4.
OECD (2017). OECD Science, Technology andIndustry
Scoreboard
2017:
The
digitaltransformation,
OECD
Publishing,Paris.
http://dx.doi.org/10.1787/9789264268821-en

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Vol.7 Issue 1

Japan Academy of Multinational Enterprises
2021-2023 Executive Board
President:International Relations:Tetsuya Usui (Nihon University)

Chie Iguchi (Keio University)
Hiroshi Hoshino (Kyushu University)
Naoki Yasuda (Rikkyo University)
Xiaohong Qin (Kyushu Sangyo University)*

Vice President:
Yoshinori Yasuda (Soka University)
Masayuki Furusawa (Kindai University)

General Affairs:
Masahiro Ida (Hannan University)
Hiroshi Hoshino (Kyushu University)

General Planning:
Yasuro Uchida (University of Hyogo)
Hajime Baba (Kansai University)
Tamiko Kasahara (University of Shizuoka)
Nisato Suzuki (Meiji University)
Tatsuo Mori (Hirosaki University)*

Publications Commitee:
Hajime Baba (Kansai University)
Takeshi Fujisawa (Kwansei Gakuin University)
Naoki Yasuda (Rikkyo University)
Sadanori Arimura (Yamaguchi University)*
Hiroyasu Furukawa (Nihon University)*

Best Book and Paper Award Commitee:
Naotoshi Umeno (Osaka University of Commerce)
Susumu Harada (Meiji University)
Shohei Tabata (Kobe International University)
Shingo Nishii (University of Hyogo)*
Hirofumi Tatsumoto (University of Tsukuba)*

Public Relations:
Masashi Arai (Asia University)
Tamiko Kasahara (University of Shizuoka)
Yukiko Shinomiya (Kindai University)
Hiroyuki Yamabe (Nara Prefectural University)
Takao Yamamoto (Kanagawa University)*

Program Commitee:
Tomokazu Seki (Rikkyo University)
Takeshi Fujisawa (Kwansei Gakuin University)
Takahide Yamaguchi (University of Hyogo)
Motoyuki Kanetsuna (Nanzan University)*
Yoshikazu Sakamoto (Nihon University)*
Masato Yamauchi (Senshu University)*

Eastern Chapter:
Susumu Harada (Meiji University)
Kohei Mishima (Keio University)
Chitose Furukawa (Aichi University)*
Tatsuya Karasawa (Kanto Gakuin University) *Mitsuru Nakagawa (Nihon University)*

Western Chapter:
Yukiko Shinomiya (Kindai University)
Naotoshi Umeno (Osaka University of Commerce)
Sungwoo Byun (Kindai University)*
Taehyun Lee (Hannan University)*
Yoshihiro Matsukawa (Hiroshima University of Economics)*

Executive Secretariat and Directors:
Head Office: Takuya Fukazawa (Tokyo Fuji University)
Eastern Chapter: Nisato Suzuki (Meiji University)
Western Chapter: Hiroyuki Yamabe (Nara Prefectural University)

Auditor:Kazumi Tada (Hosei University)
Risa Jitosho (Ryukoku University)

Note: Those with * are coordinators of the role.

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JAPAN MNE Insights

Vol.7 Issue 1

Japan MNE Insights will be published twice a year on the AMNE official website (www.mne-jp.org).
Please feel free to contact with the editorial team if you have any question or request.

Japan MNE Insights Editorial Team
Editor-in-Chief
Tamiko Kasahara (University of Shizuoka)
EditorMasashi Arai (Asia University)
Chie Iguchi (Keio University)
Masato Yamauchi (Senshu University)
Japan MNE Insights Editorial Team is currently located at
Office of Dr. Tamiko Kasahara,
University of Shizuoka, School of Management and Information
52-1 Yada, Suruga-ku, Shizuoka, 422-8526, Japan
TEL/FAX:+81-54-264-5435 (direct)
Contact e-mail address: kasahara@u-shizuoka-ken.ac.jp
Copyright @ Japan Academy of Multinational Enterprises (Japan)

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