In the last six months ending September 30, 4,990 companies in Japan went bankrupt, the highest number in 10 years. This is an 18.6% increase compared to last year and marks the third consecutive year of rising bankruptcies.
A report from Japan’s largest credit investigation agency, Teikoku Data Bank, shows that the number of bankruptcies has reached its highest level since 2013, mainly due to rising costs affecting businesses. From the second half of the fiscal year ending in March 2022, the number of bankruptcies has been on the rise.
The sharp increase in bankruptcies reflects the impact of rising prices, especially for small businesses. Among the 4,990 bankruptcies, a record 472 companies reported inflation as the main reason for their failure. The depreciation of the yen has raised import costs for many goods, including food and energy, and Japan’s main price indicators have stayed at or above the Bank of Japan’s 2% target for over two years.
The report reveals that the construction, manufacturing, and retail sectors are experiencing the highest number of bankruptcies due to rising costs.
In addition to increasing prices, 163 companies reported labor shortages as a reason for their struggles. Japan’s unemployment rate has been below 3% for over three years, the lowest among developed nations.
The tight labor market puts pressure on businesses to raise wages to keep employees, adding more financial strain. While some Japanese companies proposed wage increases of over 5% during salary negotiations this year, many small and medium-sized enterprises are finding it hard to do the same.
