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5. Transition Period, the First Stage (1985~1999)

1) Development of Structural Change and Measures for Industrial Agglomeration

From 1985 on, Japan experienced a drastic yen revaluation and depression. The yen revaluation damaged and spoiled the competitiveness of particular types of industry and particular regions where such industries agglomerated.

The Temporary Law concerning Measures for Changing Business for Specific Small and Medium Enterprises was enacted in 1986, in order to specify type of industry for SMEs and to help convert businesses. Also enacted was the Temporary Law concerning Measures for Small and Medium Enterprises of Specific Regions, in order to promote the conversion of businesses of SMEs in specific regions heavily influenced by the economic depression and yen revaluation..

2) Development of Measures for Promoting Start-Ups and Ventures

After the collapse of the economic bubble in 1992, the inflexibility of the Japanese economy became the subject of discussion. The start-up rate decreased and the closure rate increased, and Unemployment also tended to increase.

In order to promote start-ups and starting new business of SMEs in such circumstances, the Temporary Law Concerning Measures for the Promotion of the Creative Business Activities of Small and Medium Enterprises was enacted in 1995. This law was designed to help SMEs and individuals to inaugurate new businesses or invest in research and development, without specifying particular type of industry.

3) Development of Measures to Support Business Innovation

In the 1980s and 1990s, the environment surrounding SMEs in Japan has undergone many major changes, as a result of the increasingly intense competition, progress in Information Technology, and other factors in the global economy. Each SME had to make a change in direction from reduced costs (“cost-down”) competition, which has few future prospects, to management issues such as greater product quality and improvement in marketability.

In such circumstances, in order to strengthen support for business innovation, the Small and Medium Enterprise Modernization Promotion Law (enacted in 1963), which encouraged industry-wide large-scale benefits (“scale merit”) and modernization of equipment, and the Temporary Law concerning Measures for Smooth Adaptation to Structural Changes in Economy by Advancement of Specific Small and Medium Enterprises to New Fields, etc. (enacted in 1993), for which the subjects of assistance were limited, were integrated to become the new Law on Supporting Business Innovation of Small and Medium Enterprises (1999).


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