Small, Midsize Japan Firms Start Paying COVID Loans

An increasing number of small and midsize companies have begun repaying virtually interest-free and unsecured loans provided by the government as part of countermeasures implemented during the COVID-19 pandemic, as reported by Yomiuri Shimbun.

In March 2020, the government initiated a program to offer essentially interest-free, unsecured loans to help small and midsize companies stay afloat amid declining sales. I Photo: Amagasaki Social Welfare Council via Kyodo

Concerns have been raised about a potential increase in corporate bankruptcies due to the inability to repay these loans. In this regard, financial institutions should make efforts to provide tailored support.

During the pandemic, many companies, particularly in the tourism and restaurant sectors, faced significant challenges due to a sharp drop in patronage.

In March 2020, the government initiated a program to offer essentially interest-free, unsecured loans to help small and midsize companies stay afloat amid declining sales.

Under this government program, prefectural governments cover the interest on loans for three years, and principal repayments are deferred for up to five years.

Initially, these loans were exclusively handled by government-affiliated financial institutions, but as of May 2020, private financial institutions also began offering them. Applications for these loans closed in September of the previous year, with approximately 2.5 million applications received and total disbursements of about ¥43 trillion.

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