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Japan pushing heirless companies to sell, not close

Regional governments help aging owners find suitable buyers

Shigetoshi Hishinuma, president of now-defunct metalworking company Hishinuma seisakujo.

TOKYO -- Japan is taking steps to help aging business owners find buyers for their companies rather than shut them down for lack of suitable successors. By doing so, it seeks to protect jobs and economic value as the population ages and shrinks.

The country has 2.45 million small and midsize businesses run by those at or over the average retirement age of 70, roughly half of which are without successors. An even larger number are run by those aged 65 to 69. Around 28,000 businesses closed their doors in 2017, according to Tokyo Shoko Research -- a 30% increase in 10 years.

One was Hishinuma seisakujo, a metalworking company in Tokyo's industrial Ota Ward that shut down late last year. "There's no excitement in a still factory -- everything's frozen, desolate," said Shigetoshi Hishinuma, its 75-year-old erstwhile president, laying a loving hand on the quiet machinery. The 60-year-old company, whose offerings included elevator parts, was in the black at the end. But Hishinuma had no successor to take over, as he had from his father. When he retired, Hishinuma seisakujo was forced to close.

Urban manufacturing boomed during Japan's period of high-speed economic growth from the late 1950s to the early 1970s. But the factories in Ota have largely disappeared in recent years, dwindling from a onetime peak near 10,000 to around 3,000. This is partly because technological innovation in the sector has reduced demand for such small-scale local manufacturing. But aging business owners' inability to find willing successors is also a significant factor that is intensifying as the population ages.

The problem is hardly exclusive to manufacturers. Gensui, a purveyor of colorful Japanese sweets that has operated in Kyoto since 1825, plans to shut its doors in late March. "I don't have anyone to take over for me, and it's growing harder to stay on my feet and do my work," said 72-year-old Kiyofumi Inoue, the seventh in his family to run the shop.

If these closings go unchecked, Japan could lose around 6.5 million jobs and around 22 trillion yen ($205 billion) in gross domestic product by 2025, estimates the Ministry of Economy, Trade and Industry. Roughly half of businesses that shut down do so while still in the black. Often, owners themselves do not wish to see their companies vanish for good but cannot find anyone to keep them open.

This need not be the case, the government believes. The cabinet approved Feb. 6 a plan for the coming decade that aims to advise 50,000 businesses annually on how to pass the baton to the next generation, as well as to support 2,000 deals each year to save companies from extinction.

So-called succession support centers around the country, such as one run by the Saitama Chamber of Commerce and Industry, play a central role in this scheme. An SCCI center staffed with experts including lawyers and accountants helps interested business owners from Saitama Prefecture find buyers for their companies in the area.

In mid-February, the 69-year-old president of an automotive repair shop was in talks to sell his company to a vehicle assembler in nearby Tochigi Prefecture. Conditions for the deal "look good," and the sale "looks like it will wrap up in a month or two," Mineo Ishikawa, the SCCI center's chief, told the repair company's president.

"I no longer feel uneasy thinking about the company's future," the president said. "I couldn't have done it alone," he said of the sale.

A similar center run mainly by the Tokyo Chamber of Commerce and Industry has begun proactive outreach to business owners turning 60. Staffers pay visits, asking these leaders to consider how they plan to hand off their companies.

Such efforts helped Kenichi Matsumura, president of Tokyo-based Medical Pine, sell shares in the maker and distributor of medical devices to a Saitama Prefecture-based wire and cable maker last year. The Tokyo succession support center helped locate the buyer, and a mergers and acquisitions company handled the rest. Matsumura intends to remain president for now, overseeing Medical Pine's forays abroad. But "the buyer said they want me to take the time to cultivate a successor," he said.

Yet companies whose leaders are less active and engaged than Medical Pine's could find such arrangements tougher to make. Earnings at small and midsize businesses tend to rise when their presidents are in their 30s, 40s and 50s but fall when the leaders move into their 60s and 70s, according to Tokyo Shoko Research. They "need to start thinking about succession in their 50s, when they are still at the height of their powers," the research company's Nobuo Tomoda said. With many Japanese business leaders having passed that age, a number of closings are likely inevitable before these support measures make their full effects felt.

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