Japan records highest number of bankruptcies in ten years due to rising costs. … Some 4,990 companies went bankrupt during this period, an increase of 18.6% from a year earlier, according to a report by Teikoku Databank published on Tuesday. The number of bankrupt companies in Japan has continued to rise since the second half of the year ending in March 2022. The increase in bankruptcies partly reflects the impact of rising prices, especially for smaller businesses. According to the report, 472 companies out of 4,990 cited inflation as the main reason for their failure. The country’s main price gauge has remained at or above the Bank of Japan’s 2% target for more than two years as weakness has inflated import costs for everything from food to the energy. Construction, manufacturing and retail are among the sectors with the highest number of cost-related failures, according to the report. Beyond the increase in prices, a record 163 companies cited the lack of work as the reason for their struggles. Japan’s unemployment rate has been below 3% for more than three years, the lowest level among developed economies. The tight labor market puts pressure on companies to raise wages to keep employees, further straining their budgets. While some Japanese companies managed to offer pay increases of more than 5% to their employees during wage negotiations earlier this year, many small and medium-sized businesses reported difficulties afterward. Going forward, another potential risk for businesses is the rise in debt service costs following the Bank of Japan’s interest rate hikes in March and July. Several large and regional banks have already announced that they will increase interest rates for some short-term loans.
