Bank of Japan raises policy interest rate to 1.0%; SMEs prepare for a “world with interest rates”

The Bank of Japan raised its policy interest rate to 1.0%. The interest rate at which companies borrow money will also rise. Small and medium-sized enterprises, which account for more than 99% of Japanese companies, are braced for the arrival of a world with high interest rates for the first time in about 31 years.

Higashiosaka City, Osaka Prefecture is known as a manufacturing city. Atsushi Yoshimura (52), president of Fusehatsu Industries, a spring manufacturer, confesses his concerns, saying, ``If interest rates rise, the burden of repayments will definitely increase.It could affect capital investment.''

The 550 tsubo (approximately 1,800 square meters) factory is equipped with about 80 manufacturing machines. 42 people work at the factory, producing a wide variety of springs for everything from cars to clothespins. Annual sales are approximately 500 million yen.

This year, I spent about 30 million yen to purchase a new machine. "We are a manufacturing company, so we intend to make the necessary investments, but if interest rates continue to rise, we will have to be cautious going forward."

Due to the situation in the Middle East, the purchase price of wire-shaped metal used as spring material has risen to about 1.5 times what it was five years ago. Competition is fierce and passing on prices is not easy.

The Bank of Japan cited the economic strength as a prerequisite for raising interest rates even after the turmoil in the Middle East. However, Yoshimura, who has continued to see other companies in his industry go out of business, said, ``They say the economy is improving, but to be honest, I can't really feel it.''

The Bank of Japan has decided to raise the policy interest rate to around 1.0%. This is the highest level in approximately 31 years since 1995. What kind of impact will this have on housing loans, businesses, etc.? This is a 3-part series.