Firm entry and exit dynamics in Japan: institutions, policies, and empirical insights

Miho Takizawa ()
Additional contact information
Miho Takizawa: Gakushuin University

The Japanese Economic Review, 2025, vol. 76, issue 3, No 9, 667-687

Abstract: Abstract This study comprehensively reviews the distinctive features of firm entry and exit in Japan. As a unique feature of the survey, we focus on how Japan’s unique institutional, cultural, and policy environments interact to shape entrepreneurial behavior, firm turnover, industry structure, and, thus, the country’s long-term economic performance. While standard Schumpeterian models posit that highly productive entrants naturally displace inefficient incumbents, Japan’s financial and labor market institutions, regulatory frameworks, and cultural norms frequently delay or distort optimal exit decisions. Drawing on historical perspectives from the postwar economic boom to the prolonged stagnation of the “Lost Decades,” this survey highlights how rigid labor arrangements, “zombie lending,” and public credit guarantee programs have impeded productivity-enhancing reallocation. Recent shocks, such as the COVID-19 pandemic, further highlight the tension between broad and uniform policy support for business enterprises and the need for competitive selection processes. Drawing on micro-level evidence from the manufacturing and non-manufacturing sectors, we illustrate how small- and medium-sized enterprises (SMEs), which dominate Japan’s corporate landscape, face unique constraints and policy-induced distortions. The study concludes by proposing policy options to balance social stability with economic dynamism, including reforms to labor market rigidity, reconfiguring public credit guarantees, and tailoring financial support mechanisms more selectively.

Keywords: Japan; Firm entry and exit; SMEs; Zombie lending; COVID-19 (search for similar items in EconPapers)
JEL-codes: D22 E24 G21 L26 O53 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s42973-025-00200-0 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jecrev:v:76:y:2025:i:3:d:10.1007_s42973-025-00200-0

Ordering information: This journal article can be ordered from
https://www.springer.com/journal/42973

DOI: 10.1007/s42973-025-00200-0

Access Statistics for this article

The Japanese Economic Review is currently edited by Michihiro Kandori

More articles in The Japanese Economic Review from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().