Re: A news item and subject which I just want to check out (105) September 15, 2023

 It is mid-September now, but severe hot weather continues in the daytime. But the mornings and evenings have become cooler and it is time to feel signs of autumn. Various fruits are in store around this time of the year. When I was young, “21st Century” a special product in Tottori was the exclusive brand when it comes to “pears”. Now, not only pears but also oranges and apples and so on are cultivated in various regions and producers are competing for shipping time and taste. Supporting them is, of course, progress of cultivating technology such as introduction of IT and AI to agriculture, but please don’t forget that improvements of logistics and distribution systems such as storage and transport for freshness have also contributed.

By the way, I underwent an annual medical checkup from late August to September. In addition to usual check, I underwent CT, MRI, ultrasound scan and gastroscope from my head to my stomach and I also underwent colonoscopy for the first time in two years. Fortunately, the results were “no problem to report”. This does not mean that I can rest assured, because I will be 81 years old next month. For the time being, I will be able to enjoy “Autumn with the sky clear and blue, and horses growing stout” and I fully feel the gratitude of being healthy.

■■There has been a lot of movement lately.
■An increasingly multipolar and polarized world:
The Prime Minister Kishida attended ASEAN Plus Three Summit and East Asia Summit called EAS held in Jakarta, the capital of Indonesia from September 5 to 8, and also attended G20 Summit held in New Delhi, the capital of India from September 9 to 10. Standing out in relief was the difference of opinions about global environmental problem and economic support between developed countries and emerging countries, in addition to a confrontation between autocratic or totalitarian countries and liberal countries. And among emerging or developing countries, it seems that the group called BRICs (Brazil, Russia, India and China) that has rapidly achieved economic development since 2000 is moving to expand member countries. However, there is a difference in distance from developed countries for each country, and directions don’t always match. Anyway, Among the former colonized emerging countries, potential nationalism against the former suzerain countries is becoming apparent. For example, it seems that India is seriously considering to rename a country name to “Bharat” in Hindi. India overtook China and became the world’s largest populous country 1.408 billion this year. 80 % of citizens of India is Hindus but a crackdown on Muslims that are the mainstream of the remaining 20 % has often led to clashes. India is roughly holding up secularism or separation of church and state, but the Prime Minister Modi is showing a movement towards a religious country with Hinduism as supremacy. He has aimed for a position as a leader of Global South and resulted in the settlement of declaration by leaders. However, in multipolar and polarized world, there was a gap in each other’s claims that can’t be bridged, and they stopped at a list of problems and did not show a roadmap to concreate measures. It can’t be denied that it is somewhat ceremonial, but it is very meaningful for leaders to meet face-to-face. In that respect, it was a pity that the President Xi Jinping in China that is increasing the color of the conflict with the United States did not attend and avoided the direct dialogue with the President Biden in the United States. It seems to me that he hates being taken his word about the expansion of territorial right in East China Sea which is met with condemnation from ASEAN countries because China published a new map.
By the way, factors of instability to the global economy and society are as follows even if these come to mind now. ①prolonged war in Ukraine and concern about the tapering of support ②slow growth of Chinese economy leading the world and serious internal contradictions and hard line policy against Taiwan accordingly ③strengthening the collaboration of rogue states, Russia and North Korea, and so on. In addition to these, ④If Mr. Trump takes up the President of the United States in November next year, the United States will strengthen protectionism and isolationism furthermore and the world will be twisted around and fall in confusion.
For Japan that has no special natural resources and is inherently vulnerable to geopolitical risks, the important subject is how to promote “a reform of awareness of Japanese people” to “protect national interests” and “economic structural reform” necessary for revival of national power.

■Surging bankruptcies:
Bankruptcies reserves of small and medium-sized enterprises are increasing. The number of “subrogation reimbursement”, that means credit guarantee corporations take over the repayment of loan with guarantee, is 9,720 exceeding the previous year’s level by 70 % from April to June this year. Year-over-year exceeding is the 7 th consecutive quarter. Due to the easing of corona restrictions, economic activities have reopened and sales centered on the service industry are back due to increase of inbound customers. However, according to Tokyo Shoko Research, about 40 % of companies is not able to pass on the cost increase, such as high prices and rising labor costs because of labor shortage and so on, to selling prices. It seems that business operators that don’t make a profit as expected and are struggling to pay off their debts are increasing now.

■Business succession of small and medium-sized enterprises:
According to Teikoku Data Bank, average age of presidents of companies with annual sales less than 100 million yen in 2022 was 61.8 years old increased by 9.4 % compared to 1990. The ratio with no successor was 57.2 % out of the entire companies. It means that nearly two out of three companies have no successor. The number of bankruptcies because of no successor was record high 487 in 2022. According to a trial calculation by the Small and Medium Enterprise Agency, small and medium-sized business owners who will be over 70 years old considered to be the average retirement age by 2025 is about 2.45 million and 1.27 million successors out of them are undecided. The number of companies in Japan is over 3 million and 99.7 % of all companies in Japan is small and medium-sized enterprises which account for about 70 % of total employed population. The sound development of small and medium-sized enterprises is very important in supporting Japanese economy and the lives of the people.

Under such circumstances, I gave a lecture at a seminar called “towards 2024 problem of transport and logistic industry” hosted by Strike Co., Ltd. making a specialty of M&A of small and medium-sized enterprises on August 22. My title was “current status and issues of trucking industry ~trucking operators should find a way out by themselves~”. More than 99 % of trucking industry is small and medium-sized micro enterprises and it is in severe situation in terms of management. It consists of multi-layered structures such as “true shipper, principal contractor, subcontractor, sub-subcontractor, and so on”, and working long hours and low wages below average across all industries are norm, and serious driver’s shortage and aging are going on. On top of that, carrying cargo from A point to B point alone does not provide additional value now, and investing in logistics assets and computerization and labor saving, introduction of IT and AI, are essential. I said that a certain business size is necessary in order to make it possible and I also mentioned measures such as M&A and holding company based on that assumption. And I concluded my remarks that the most important thing is that I want you to summon up your guts like “every operator finds a way out by themselves”, in other words, “animal spirits” or entrepreneur spirits fading among recent Japanese managers.

Other blogs