The Japanese economy showed positive signs in spring 2024, with nominal GDP exceeding JPY 600 trillion on an annualized basis for the first time, and capital investment reaching a 33-year record high. A virtuous cycle of wages and prices is being realized, as seen in the labour-management wage negotiations in spring 2024, which lead to a high wage increase for the first time in 33 years, contributing to household demand. However, although the corporate sector has remained firm, wage and income growth has not been able to consistently exceed inflation, and personal consumption continues to be weak. For this reason, the Japanese economy is currently at a crossroads.
Lending to SMEs declined continuously between 2007 and 2012. In 2013, the volume of outstanding SME loans shifted upward and has increased consistently since then to reach JPY 356.2 trillion in 2024.
Average interest rates on new short-term loans in Japan have been very low and further declined between 2007 and 2023, falling from 1.64% to nearly a quarter of that amount (0.42%) due to policy of monetary easing. However, in 2024, after the monetary policy meeting in March 2024, the rates increased to 0.51 % in 2024. Long-term interest rates on new loans followed a broadly similar pattern, more than halving from 1.73% in 2007 to 0.78% in 2022. At the bottom of 2019, the rates are slightly increased to 1.07% in 2024.
Since 2015, VC investments have been rising rapidly, with the exception of a sharp drop amid the disruption of the COVID-19 pandemic in 2020, and reached their highest value of JPY 341 billion in FY2021. However, they declined to JPY 293 billion in FY2024.
In regard to leasing, after an upward trend in 2019 pre-COVID, volumes decreased to JPY 2.1 trillion in 2021. More recently volumes have risen to reach JPY 2.7 trillion in 2024.
SME bankruptcies, which account for more than 99% of all bankruptcies in Japan, decreased from 15 500 in 2008 to 6 000 in 2021. With COVID-19 financing support measures, the number of SME bankruptcies was curbed at lowest level over the last 57 years. However, since then, the number of SME bankruptcies has started to increase, and the number of SME bankruptcies reached 10 004 in 2024.
Total non-performing business loans (NPLs) have declined continuously since FY2013, after having experienced erratic movement over the FY2007-12 period. In FY2019, total NPLs decreased to JPY 10.3 trillion, followed by increases to JPY 13.5 trillion in FY2024.