One Trillion of Loans Not Repaid

Board of Audit of Japan submitted annual Audit Report of FY 2022 to Prime Minister Fumio Kishida on November 7th. The report found that 6 percent of total special loans, through government-related financial institutions, for small or medium-sized businesses suffering from COVID-19 was not or would not be repaid. It was inevitable for each financial sectors not to be able to make sufficient check on every loan at the time immediate help for ailing small businesses were needed. However, it is notable that the taxpayers may have to make up for the bankruptcies.

BoA investigated the special loan by Japan Finance Corporation, a government-affiliated financial institution, and Shoko Chukin Bank, a special company dedicated to small and medium-sized enterprises. According to the report, the total amount of the loan at the end of March 2023, was ¥19.4 trillion, most of which is supposed to be the loan with no interest and no security. The loan, called Zero-zero Loan, is secured by the national government to salvage the businesses with significantly reduced their sales by pandemic.

 

Although ¥5.06 trillion has been repaid, ¥69.7 billion was determined as uncollectable and ¥124.6 was possibly not collectable. Another ¥878.5 billion was categorized as high-risk loans. Total amount of those bad loans exceeded ¥1 trillion. Nikkei Shimbun reported that Zero-zero Loans as a whole, adding those by private financial institutes, would be more than ¥2 trillion.

 

Main reason of exacerbated financial situation is increasing bankruptcies of small and mid-size businesses, Caused by prolonged infection, bankruptcy of restaurants or other food service businesses has been accumulating. Although COVID-19 has less impact on the society now, rise of commodity price prevents small businesses from revival.

 

BoA recommended that JFC and Shoko Chukin Bank should grasp the situation of each business, with consideration on the great amount of total balance of remaining loans, and increasing cases of refinancing. It also urged JFC to carefully check the financial situation of individuals and take necessary action at the time of filing a new loan. Even though the repayment for the principal, to which certain period of forbearance had been set, has begun earlier this year, BoA is going to strictly continue the audit.

 

BoA also reported the result of its investigation on the price of gasoline. It indicated that the subsidy to the gasoline wholesaler has not reflected on the retail prices. While Kishida administration decided to extend the subsidy to next April, there is no visible exit from the policy supporting for oil companies.

 

At the beginning of COVID-19 pandemic, Shinzo Abe administration put the priority on maintaining industries, which invited some criticisms that the government was putting the ordinary people’s life aside. If those people need to compensate for the bankruptcy of the ill-managed businesses, more people will be frustrated with the policy delivered by Kishida administration.

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