Corporate Bankruptcies in Japan Exceed 10,000 for the First Time in Over a Decade
In a significant downturn for the Japanese economy, the number of corporate bankruptcies, each with liabilities of ¥10 million or more, reached 10,006 in 2024. This figure, reported by Tokyo Shoko Research, represents a 15.1% increase from the previous year and surpasses the 10,000 mark for the first time in 11 years. This upward trend marks the third consecutive annual rise in bankruptcies, influenced largely by escalating prices stemming from a weakened yen and persistent labor shortages impacting various industries.
Despite the rise in bankruptcies, the total liabilities left by these failed companies decreased by 2.4% to ¥2.3 trillion. Notably, only one bankruptcy was reported with liabilities exceeding ¥100 billion, specifically concerning MSJ Asset Management, which had debts totaling ¥641.3 billion. The majority of the bankruptcies--over 70%--involved companies with liabilities of less than ¥100 million.
A closer look at the data reveals that bankruptcies rose in eight out of the ten sectors surveyed. The services sector was particularly affected, recording 3,329 bankruptcies, which is an increase of 13.2% from the previous year. The construction and transportation industries also faced significant challenges, with their bankruptcy rates rising by 13.6% and 9.8%, respectively, largely due to stringent hiring regulations and overtime rules.
Labor shortages have emerged as a critical factor in business failures, with bankruptcies linked to this issue surging approximately 80% to a record high of 289 cases since Tokyo Shoko Research began tracking such data in 2013. Additionally, inflation-related bankruptcies--those arising from businesses' inability to pass on rising costs to consumers--saw a second consecutive annual increase, totaling 698 cases.
Interestingly, the number of bankruptcies among businesses that had benefitted from interest-free, unsecured loans during the COVID-19 pandemic decreased to 567, down from 635 the previous year. In December alone, corporate bankruptcies rose by 3.9% compared to the same month in the prior year, totaling 842 cases. Companies grappling with the dual challenges of reducing debt and adjusting prices in response to increased operational costs are likely to encounter even more difficult management conditions, especially given the current trend of rising interest rates.
A representative from Tokyo Shoko Research cautioned that the combination of inflationary pressures and labor shortages may continue to precipitate further bankruptcies throughout 2025.
