From wagyu beef to melons, Japan's ¥234 tril virus rescue piques struggling firms

As the coronavirus jolts Japan, the government's huge stimulus package has come under fire from hard-hit restaurant owners for channelling funds for stuff like wagyu beef, melons and tourism rather than accelerating help for firms with burning cash needs.

The restaurant industry's struggles highlight a more substantial problem in Japan's revival plan, which at 234 trillion yen ($2.2 trillion) may be the size of Italy's economy but continues to be falling short of satisfactory support to an essential segment - small businesses which employ 70% of the nation's workforce.

That puts at risk Japan's recovery from the worst postwar recession it is now facing. The 24 trillion yen restaurant industry is crucial to boosting growth as it, as well as lodging, creates about 1.3 million new jobs a year, or roughly 17% of all the new employment.

More than 190 smaller businesses including 30 restaurant operators have gone bust through the current health crisis.

Yet, the government's slow response in pushing through hundreds of vast amounts of yen stuck in paperwork is threatening the same fate for many more firms in urgent need of cash to pay salaries and rents.

In contrast, authorities have rapidly pressed ahead with plans to invest nearly 1.8 trillion yen for a "go-to" campaign to market tourism, and 140 billion yen to greatly help politically powerful farmers and fishermen promote expensive foodstuffs such as mangoes, tunas and yellowtails. An extra 1 billion yen has also been set aside to market international flights - when almost all planes are grounded.

"We, together with numerous others, are running out of money. If the situation is left as is, we will go under one after another. Then, nobody will be left to benefit from the tourism campaign," said Yoshikazu Moriyama, 42.

Sales at Moriyama's six fish joints called "IROM Inc." have tanked 90% and he's struggling to pay rent and salaries for some 100 staff.

"What we need now is financial support to greatly help us pay rents and compensate for business closures instead of future campaign on tourism," Moriyama told Reuters.

Some owners say the government's subsidy as high as $55,000 for every firm to cover rents is insufficient, and that it might afford to do more to keep businesses open and release cashflow. This past year, rents for most of Japan's restaurants totalled 1.4 trillion yen -- significantly less than the 1.8 trillion yen entering tourism promotion.

The government's subsidy list includes items such as for example five-star sirloin Kobe beef steak, which costs some 5,000 yen for 100 grams, and top-quality Yubari melon that sells for more than 10,000 yen per 1.6-kg fruit.

Agriculture ministry official, Satoru Nishio, said the subsidy, which also covers expensive mangoes, strawberries and tunas, was intended "to back farmers facing a decline in inbound tourists and exports."

The federal government subsidizes half of the price tag on buying the produce for e-commerce, take-away services and provision of school meals.

FUNDS TIED UP IN RED TAPE

While a complete of 21 trillion yen in financing, loans, cash subsidies and other benefits have been set aside for smaller businesses, some analysts say struggling organizations have already been deprived of quick access to much-needed cash due to red tape.

"A government financial agency should provide loans that can be allotted to rents to prevent cashflow from drying up," said Kota Matsuda, a former lawmaker who now runs a chain of 30 restaurants including 22 Hawaiian-style restaurants called Eggs 'n Things, employing about 600 workers.

"It's impossible to cover rents solely with subsidies," said Matsuda, who has applied for funds but has been annoyed by the cumbersome process as he tries to meet cash needs greater than 75 million yen for salaries and 50 million yen for rents.

Sales at his restaurants, which reopened fully last Saturday, declined by 90-95% year-on-year in April.

IROM's Moriyama, who requested a few subsidies, said they were "definately not enough" to create up for the losses.

"I can't foresee exactly what will eventually my business."