On October 8th, Japan’s Teikoku Databank released updated data highlighting 2024 first-half bankruptcies in the nation.
Wage movements have a direct impact on the residential real estate market of any country and Japan is no different.
If corporate bankruptcies are rising, then it means they are firing their employees which, in turn, could have a negative effect on buyers and renters which, if sustained, would be a catalyst for softening prices and rents.
On the other hand, some like Richard Katz in his well-read book “The Contest for Japan’s Economic Future: Entrepreneurs vs Corporate Giants”, argues (amongst other things) that bankruptcies are a necessary precursor for the creative destruction that would allow talented employees, previously locked up in go-nowhere zombie firms, to move to new companies with higher pay and more fulfilling work.
2024 first half (April to September) Japan bankruptcies. Chart provided by Teikoku Databank; edited by Patience Realty.
Below is an outline of the Teikoku Databank report as well as the original Japanese language version linked at the end of this article.
Key Takeaways:
Increase in Bankruptcies: In the first half of 2024, the number of bankruptcies reached 4,990, marking an 18.6% increase from the same period in 2023 (4,208 cases). This figure is the highest since 2013 for the first half-year, and it continues a six-consecutive-half-year upward trend since the second half of 2021 (2,978 cases).
Total Debt Decline: Total debt amounted to ¥1.3294 trillion, a 16.2% decrease from ¥1.5868 trillion in the same period of 2023. Despite exceeding ¥1 trillion for the third consecutive year, the number of large-scale bankruptcies (debts exceeding ¥10 billion) fell from 10 to 3, resulting in a year-on-year decrease for the second consecutive year.
Industry-Specific Trends: For the second year in a row, all industries recorded an increase in bankruptcies compared to the previous year. The "Service Industry" saw the highest increase (1,312 cases, up 28.4%), reaching its highest level since 2000. The "Retail Industry" also saw a rise (1,048 cases, up 18.4%), with restaurant bankruptcies leading the way (439 cases, the most since 2000). The rising cost of raw materials and inflation were key factors driving food-related bankruptcies.
Regional Differences: All regions saw an increase in bankruptcies for the second consecutive year, with all areas reporting their highest figures in the past decade for the first half of the year. The Greater Tokyo Area (Kanto) region saw the largest number (1,759 cases, up 13.3%), followed by Greater Osaka (Kinki) (1,259 cases, up 21.9%), which exceeded 1,200 cases for the first time in 11 years.
Post-COVID Loan Bankruptcies: A record-high 360 bankruptcies were linked to "Zero-Zero" (COVID-related) loans, marking the highest number recorded in a half-year period.
Labor Shortage Bankruptcies: "Labor shortage bankruptcies" reached 163 cases, surpassing 150 for the first time in a half-year period.
Succession-Related Bankruptcies: Though the number of bankruptcies due to "lack of successors" decreased from the previous year to 239 cases, it remains at a high level.
Inflation-Related Bankruptcies: There were 472 cases of bankruptcies attributed to rising prices, significantly exceeding previous records.
Industry Breakdown: A Surge in Service and Retail Sectors
For the second consecutive year, bankruptcies increased across all industries. The service sector saw the largest rise (1,312 cases, up 28.4%), marking its highest level since 2000.
The retail sector followed with 1,048 cases (up 18.4%), surpassing 1,000 cases for the first time in 11 years.
Specifically, restaurant bankruptcies (439 cases) marked the highest levels since 2000, driven by surging raw material costs and inflation.
Notable increases were also seen in the construction sector (921 cases, up 9.5%), with subcontractor bankruptcies rising due to aging workforces and labor shortages.
Main Causes of Bankruptcies: Economic Slump and Sales Declines
Bankruptcies due to economic downturns totaled 4,171 cases, surpassing 4,000 for the first time in 11 years.
The primary cause was "sluggish sales," which accounted for 4,100 cases, a 23.8% increase from the previous year.
This represented 82.2% of the total, the second-highest level since the first half of 2015.
Other contributing factors included "accumulated bad debt" (10 cases, up 25%) and "difficulties in collecting accounts receivable" (32 cases, up 88.2%).
Scale of Bankruptcy: Small and Medium Enterprises at Risk
Bankruptcies involving debts under ¥50 million surged to 3,017 cases, a 24.5% increase from the previous year.
The increase primarily impacted small and medium-sized businesses, while larger bankruptcies (debts over ¥5 billion) decreased.
Bankruptcies among companies with less than ¥10 million in capital (including individuals) made up 71.3% of the total.
Business History: Long-Established Companies Also Hit
Bankruptcies among companies with more than 30 years in business reached 1,589 cases (up 17.3%), accounting for 31.8% of the total.
This was the highest figure in 11 years.
Notably, 83 bankruptcies involved companies that had been in business for over 100 years, a significant increase of 80.4% compared to the previous year.
Regional Trends: Record Bankruptcies Across Japan
All regions recorded their highest number of bankruptcies in the past decade for the first half-year. The Kanto region had the most cases (1,759, up 13.3%), with Tokyo accounting for a significant portion.
The Kinki region followed closely (1,259 cases, up 21.9%), driven by increases in Osaka and Nara. The largest growth rate was in the Chugoku region (243 cases, up 39.7%).
Notable Bankruptcies: Restaurants Face Mounting Pressure
The restaurant industry has seen bankruptcies rise to record levels in 2024.
A total of 650 bankruptcies were recorded from January to September, a 16.5% increase from the previous year.
If this trend continues, the total for 2024 is projected to surpass 870 cases, exceeding the 2020 record. Leading the bankruptcies are pubs (160 cases) and Chinese-style restaurants (117 cases), followed by Western-style restaurants and nightclubs.
Major urban centers such as Tokyo and Osaka account for nearly 30% of the total.
Further Reading:
Teikoku Databank 2024 First Half Japan Bankruptcies (Japanese only; more granular data available than that presented above
Source:
Teikoku Databank (Japanese only)
