Smaller firms in Japan can transfer costs to larger businesses

The Japanese government has unveiled regulations allowing small and mid-sized companies to pass on wage hikes and higher raw material costs to larger firms.

“We will set the stage for small and midsize companies, which support employment in local economies, to be able to properly pass on costs to their prices and make profits,” said Prime Minister Fumio Kishida at a meeting with business leaders, according to The Mainichi. 

The government wants to prevent larger firms from taking advantage of their size and setting unfairly low prices when engaging in business with subcontractors. Such a practice impacts the profitability of smaller firms and goes against Japanese regulations, writes the publication. 

Business representatives from 27 organisations were present at the meeting, including business lobby Japan Business Federation and the Japan Chamber of Commerce and Industry.

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The Japan Fair Trade Commission and the government agency for small and midsize companies also plan to compile a report by June on unfair practices. The parties will set up a website, which will allow subcontractors to submit information anonymously on bigger companies performing illegal practices.