In a challenging economic landscape, Japan witnessed a significant upswing in corporate bankruptcies during 2023, surpassing 8,000 for the first time in four years, according to a report from credit research agency Tokyo Shoko Research released on Monday. The number of business failures with debts totaling at least 10 million yen surged by 35.2 percent from the previous year, reaching 8,690, marking the second consecutive annual increase.
Several factors contributed to the rise in corporate bankruptcies, the most prominent being the escalating material prices and the impact of wage hikes on corporate earnings—workforce shortages, particularly affecting the construction industry, and increased labor costs. Simultaneously, fluctuations in raw material and energy prices dealt a significant blow to companies, exacerbating financial challenges already burdened by the repayment of loans obtained under the government’s pandemic relief program.
The survey covered ten industries, and all experienced an increase in bankruptcies. The service sector bore the brunt, with the highest number of cases at 2,940, reflecting a substantial rise of 41.7 percent. The construction industry followed closely, which recorded 1,693 bankruptcies, marking a 41.8 percent increase.
The total liabilities left behind by bankrupt companies rose by 3.1 percent, reaching 2.4 trillion yen. Panasonic Liquid Crystal Display Co. emerged as a significant contributor to this increase, applying for liquidation in September 2023 with debts amounting to 583.6 billion yen.
The report highlights the complex challenges businesses face across diverse sectors and underscores the impact of external economic factors on corporate stability. The labor market’s struggle with shortages and the surge in material prices pose a dual challenge for companies striving to maintain financial resilience.
As Japan navigates these economic headwinds, stakeholders and policymakers will likely scrutinize the findings to formulate strategies to support businesses, especially those facing financial strain due to a confluence of factors.
