JAPAN’S BANKRUPTCY RATES SOAR TO DECADE-HIGH LEVELS

Wed 09 April 2025:

Japan saw corporate bankruptcies climb to a record high in fiscal 2024, exceeding 10,000 cases for the first time in 11 years, according to a survey cited by the Mainichi Shimbun on Tuesday.

Tokyo Shoko Research, a credit investigation firm, noted that small and medium-sized firms were hit hardest, struggling with a lack of workers and increasing costs.

It reported that bankruptcies involving debts of at least 10 million yen ($68,100), increased 12.1% from the previous year to 10,144.

Companies with fewer than 10 employees accounted for 89.4% of the total, as they struggled to secure financing for operations following the end of special tax deferral measures implemented during the coronavirus pandemic.

Total liabilities fell 3.6% from the previous year, totaling 2.37 trillion yen.

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The services sector recorded the highest number of bankruptcies with 3,398, a 12.2% increase, and the largest since fiscal 1989. The construction sector followed with 1,943, rising 9.3%.

Bankruptcies in the logistics industry decreased 3.8%, totaling 424 cases, as a result of price negotiations.

Japan’s economy in 2024 faced tough challenges, marked by a record 10,144 corporate bankruptcies—the highest in 11 years. Small and medium-sized businesses, which dominate the economy, were hit hardest by labor shortages and rising costs.

A weak yen, hitting a 37-year low against the dollar, drove up import prices for raw materials and energy, squeezing profits. Labor shortages worsened as Japan’s aging population shrank the workforce, with 309 bankruptcies directly tied to a lack of workers.

Inflation, though modest at around 2%, added pressure, while the end of COVID-era loan relief left firms struggling to repay debts. Despite some wage growth and a tight labor market, many companies couldn’t pass on higher costs to consumers, leading to closures, especially in construction and services.

The Bank of Japan’s cautious rate hikes signal ongoing concerns about stagnation, painting a picture of an economy fighting to stay afloat.

SOURCE: INDEPENDENT PRESS AND NEWS AGENCIES

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