Japan Corporate Bankruptcies Surge to 10-Year High Amid Inflation and Labor Shortages

According to Tokyo Shoko Research, corporate bankruptcies in Japan reached a 10-year high in the first half of 2024, with 4,931 cases reported. This was mainly due to inflation and labor shortages.

Japan Sees 10-Year High in Corporate Bankruptcies Due to Inflation and Labor Shortages

A credit research company announced on July 5 that the number of corporate bankruptcies in Japan reached a 10-year high in the first half of 2024, marking the third consecutive year of growth. The increase was attributed to the impact of inflation and labor shortages.

According to Tokyo Shoko Research (via Japan Today), the number of failures in the six months increased by 22.0 percent over the previous year to 4,931 cases, with debts of at least 10 million yen ($62,200).

"There is a possibility that the number of companies that are unable to keep pace with price increases due to the ongoing weak yen will exceed 10,000, even if they pass on the increased costs to customers," a Tokyo Shoko Research official stated.

The number of cases caused by labor constraints increased by 2.2 times to 145, marking the highest number for the period since the survey commenced in 2013.

The number of bankruptcies caused by increasing prices increased by 23.4% to 374 cases. Additionally, 327 bankruptcies resulted from companies struggling to repay government-provided interest-free loans during the COVID-19 pandemic.

The construction sector was the second-largest industry in bankruptcy cases, with 947 cases, a 20.6 percent increase. This increase was attributed to the implementation of stricter overtime work regulations on April 1 and the increasing cost of construction materials.

Small Businesses Drive Japan's Bankruptcy Surge Amid Declining Large-Scale Insolvencies and Yen Depreciation

In the January to June period, the total liabilities of insolvent companies were 721.04 billion yen, a 22.8 percent decrease. The research company attributed this figure to a reduction in large-scale bankruptcies.

On July 5, the Nikkei and Topix stock indexes momentarily reached all-time highs, as investors anticipated that the continuous yen depreciation would increase profits for major manufacturing industries. Nevertheless, the bankruptcy data indicated that small businesses with fewer than ten employees constituted 88.4 percent of the cases, according to CNBC.

In the wake of the global financial crisis, bankruptcies increased to 8,169 between January and June 2009. However, they have decreased ever since, even during the coronavirus pandemic, due to adequate public financial assistance.

Bankruptcies increased by 6.49 percent to 820 cases in June compared to the previous year, while liabilities decreased by 27.20 percent to 109.88 billion yen, marking the fourth consecutive month of decline.

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