Japan corporate bankruptcies rise in 2019 for 1st time in 11 years

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The number of corporate bankruptcies in Japan increased in 2019 for the first time in 11 years, affected by a consumption tax hike, labor shortages and a series of natural disasters, a credit research agency said Tuesday.

Business failures with debts of at least 10 million yen rose 1.8 percent from the previous year to 8,383, the first increase since the 2008 global financial crisis, Tokyo Shoko Research said. About 90 percent of the bankrupt companies were small firms with fewer than 10 employees.

The total liabilities left by bankrupt companies, however, dropped 4.2 percent from a year earlier to 1.42 trillion yen, the lowest level in 30 years, as a majority of bankruptcies involved debts of less than 100 million yen, it said.

Among 10 sectors, agriculture, forestry, fisheries and mining saw the largest increase of 34.37 percent to 86 bankruptcy cases, followed by retail with an 8.65 percent rise to 1,230 and transportation up 6.72 percent at 254.

The Oct. 1 consumption tax hike to 10 percent from 8 percent slowed consumer spending, with retail sales in October falling 7.1 percent, the sharpest on-year drop in four years.

Labor shortages amid Japan’s graying population resulted in 426 corporate failures, the highest number since the credit research agency began compiling relevant data in 2013 and up from 387 in 2018.

“Medium-sized and small companies have been in a difficult situation” as the labor crunch has raised personnel costs and squeezed their profit margins, said an official of the agency.

Typhoon Faxai made landfall in eastern Japan in September, causing massive power outages in Chiba Prefecture, near Tokyo. In October, Typhoon Hagibis struck a wide area of Japan, triggering flooding and disrupting parts shipments.

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