9,642 firms collapse in first half

Slight year-on-year decline masks general upward trend

The number of corporate bankruptcies for the fiscal first half through September came to 9,642, down 0.2 percent from a year earlier, credit research agency Teikoku Databank Ltd. said Tuesday.

Despite the slight year-on-year decline, the figure represents the fourth highest in the postwar period for a first half, highlighting the fact that bankruptcies are still on the rise amid prolonged deflation, the agency said.

The bankrupt firms left combined liabilities of 6.145 trillion yen during the six-month period, down 15.2 percent from a year earlier but the fifth highest for a first half since the war.

Teikoku Databank attributed the high level of debt to the large number of major firms going bankrupt, including Chisan Co., which went bust in August with liabilities of 320.7 billion yen, and Dai Nippon Construction Co., which failed in July with debts of 271.21 billion yen.

The number of failures in the services sector, 1,075 cases, and transportation and communications sector, 420 cases, marked highs for a fiscal first half. But the construction industry, 2,977 cases, and the wholesale sector, 1,693 cases, showed the first year-on-year declines in three years on a half-year basis.

Thirteen listed companies collapsed during the half-year period. Recession-induced failures numbered 7,363, accounting for 76.4 percent of the total.

Failures of companies that had been in business for 30 years or more numbered 2,582, accounting for a record 26.8 percent of the total.

In September alone, the number of bankruptcies decreased 3.4 percent from a year earlier to 1,514, down for the second straight month, marking the second-lowest figure since the beginning of the year.

However, it is still the seventh highest figure for a September in the postwar period, the agency said.

The data cover bankruptcies of companies that left debts of 10 million yen or more.

More bonus gloom

The average winter bonus given by companies with a workforce of five or more is expected to log a year-on-year fall of 4.5 percent to 430,000 yen, Mizuho Securities Co. said Tuesday.

This would constitute the sharpest year-on-year fall on record, as well as the sixth consecutive yearly decline, the brokerage, an affiliate of Mizuho Holdings Inc., said

Many companies are cutting back on the slice of profit normally handed out to employees in the form of monthly wages and bonuses.

This income distribution strategy is likely to put additional downward pressure on family budgets.

The number of bonus recipients is expected to fall 2.2 percent to 37.56 million workers, with the combined size of bonuses likely to dip 6.6 percent to 16.3 trillion yen, according to Mizuho Securities.

The anticipated shrinkage is expected to pour cold water on consumer psychology.

The average winter bonus for civil servants will probably rise 1.9 percent to 840,000 yen, the brokerage said.

But should a part of the bonus — the part of an end-of-fiscal-year allowance payable in March whose payment is to be delayed as part of the winter bonus — be deducted from the average, the after-deduction winter bonus would come to 750,000 yen, down 8.7 percent from the year before, it said.

‘If banks accelerate the disposal of bad loans, thus triggering a chain reaction of bankruptcies of corporate borrowers, despite these revenue circumstances, it would deal a devastating blow to the economy,” a Mizuho Securities official said.

The government is reportedly planning to accelerate the pace of bad-loan disposals. When a bank disposes of bad loans, it either puts up additional loan-loss reserves from its profits or sells underlying collateral for the loans at sharp discounts to third parties.

Economists claim that banks often sever credit lines to corporate borrowers for which they had to put up large loan-loss reserves, a sharp profitability deterrent, thus causing bankruptcies among borrowers to which new credit lines were denied.

The Mizuho bonus forecast comes hot on the heels of a bleak survey report last week by the Institute of Labor Administration, a Tokyo-based think tank.

The institute expects the amount of six-month bonuses to be paid this winter by listed companies to decline by a record 6.1 percent from the previous year.