The Credit Guarantee System in Japan

The aim of this chapter is to provide a close observation of the guarantee system for small and medium enterprises in Japan, as well as making a comparison with the Italian system. The Japanese credit system for SMEs is different from other systems due to its significant size and its particular articulation into two subsystems, closely linked from a functional point of view (this combination is well-known with the name of Credit Supplementation System). In comparison with the Italian system, what can be clearly seen is the diverse nature of the two guarantee systems: public in the case of Japan and private in the case of Italy. In Japan - as in many other Asian countries - the credit guarantee system is an important part of economic policy aimed at the development and consolidation of SMEs. Unfortunately, however, "government provision of credit guarantees has the potential to distort incentives and diminish efficiency" (BIS, 2006). This gives rise to the necessity that the public guarantee institutions be suitably capitalised, provided with an effective and efficient risk management and placed within a more competitive context. The reform process of the Credit Supplementation System that has recently been started in Japan seems to be the first important step in the right direction.