Japan bankruptcies in July top 1,000 for 2nd straight month

Corporate bankruptcies in Japan surged to 1,028 in July, marking the second consecutive month with over 1,000 cases, according to a credit research company. This represents a 6.9% increase from the previous year. The surge is attributed to labor shortages and rising prices, which are straining smaller businesses. Total liabilities skyrocketed by 41.4% to 236.3 billion yen ($1.5 billion), primarily due to the bankruptcy of Osaka-based credit-card transaction system provider Zentoshin, which filed for bankruptcy with liabilities totaling 115.16 billion yen, potentially making it the country's largest bankruptcy of the year.

Bankruptcies linked to labor shortages reached a record 63 cases, with 36 caused by the rising cost of personnel. Companies are struggling to balance wage increases with their cash flow, as they cannot generate sufficient earnings to support the raises. Bankruptcies caused by rising prices reached 93 cases, the highest since 2022, as a weaker yen led to increased costs for materials and raw materials.

The services sector saw the largest number of bankruptcies at 342 cases, while bankruptcies increased in seven out of the 10 sectors compared to the previous year, including construction, retail, and transportation. Small companies with liabilities of less than 100 million yen accounted for nearly 80% of the total number of bankruptcies.