Satoaki Kanoh, owner of an acrylic panel manufacturer in Tokyo, faces the daunting task of replacing aging machinery. The customized machines cost around $330,000 each, and Kanoh worries about the rising cost of borrowing.
Japan's central bank recently raised interest rates for the first time in 17 years, ending its negative rates policy. While the move is largely symbolic, it signals a shift towards higher borrowing costs. This has raised concerns among small business owners like Kanoh, who rely heavily on loans.
Kanoh's company currently has 100 million yen in fixed-rate loans. However, he fears that even a small increase in interest rates could significantly impact his business. He estimates that a 2% increase in interest rates would be equivalent to the monthly salary of one employee.
Japanese companies and households have traditionally adopted a deflationary mindset, hoarding cash and cutting costs. However, shaking off this mindset may prove challenging as prices and wages begin to rise.
Eiichi Hagiwara, owner of a water treatment equipment designer, worries that higher borrowing costs could erode the already slim margins of small companies. He relies on soft skills and low prices to maintain business relationships.
Hagiwara has only taken out one large loan in the past, which he paid back within six months. He believes that borrowing money and paying interest can lead to financial trouble.
Some business owners, particularly those reliant on imports, hope that higher interest rates could strengthen the weak yen. However, others, like IT engineer Haruka Yoda, are optimistic that rising interest rates will be accompanied by salary increases.