The number of corporate bankruptcies in Japan has reached a five-year high in the first half of 2023, according to a survey conducted by credit research company Tokyo Shoko Research and reported by Nikkei news outlet. A total of 4,042 companies filed for bankruptcy during this period, which is approximately 32% higher compared to the same period last year.
The increase in bankruptcies involving debts exceeding 10 million yen ($70,000) is attributed to businesses repaying loans they had taken out to compensate for the losses suffered during the Covid-19 pandemic. Many companies had borrowed money to stay afloat during the challenging times, but as the economy slowly recovers, they are facing difficulties in repaying their debts.
Analysts also identified rising material and labor costs as contributing factors to the increase in corporate failures. The surge in costs has impacted businesses across various industries, making it harder for them to sustain their operations and remain profitable.
The survey covered 10 industry sectors, and all of them experienced a growth in corporate bankruptcies. The service sector was hit the hardest, with 1,351 companies filing for bankruptcy, representing a 36.1% increase compared to the previous year. The construction industry followed closely with 785 cases, marking a 36.3% year-on-year rise.
Despite the rise in the number of bankruptcies, the total debt left by these companies decreased by 45.3% to $6.6 billion compared to the previous year. This could be attributed to various factors such as debt restructuring or successful debt repayment plans.
However, analysts have issued a warning that the number of bankruptcies could continue to rise, particularly among businesses that have been severely impacted by the ongoing pandemic and have faced delays in their recovery efforts. These struggling companies may find it challenging to overcome the economic hurdles and regain stability in the foreseeable future.
It is essential to note that the pandemic’s effects have not been evenly distributed across industries. Some sectors, such as e-commerce and healthcare, have experienced growth and even prospered amid the crisis. However, other sectors, such as hospitality and retail, have faced significant challenges due to restrictions, reduced consumer spending, and changes in customer behavior.
In conclusion, the sharp increase in corporate bankruptcies in Japan during the first half of 2023 serves as a grim reminder of the ongoing economic impact of the Covid-19 pandemic. The combination of loan repayments and rising costs has put immense pressure on businesses, forcing many to declare bankruptcy. As the country continues its path to recovery, it is crucial to provide support and assistance to struggling industries and companies to mitigate further economic damage.
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