The number of corporate bankruptcies in Japan surged 42.9% from a year earlier to 1,009 in May, credit research firm Tokyo Shoko Research said on Monday.

The monthly number exceeded 1,000 for the first time since July 2013, when it reflected the impact of the end of funding support measures for small businesses introduced after the 2008 global financial crisis.

The latest result came as many companies struggle with rising prices, as well as labor shortages mainly in the service sector.

The data covered bankruptcies involving liabilities of ¥10 million ($65,581) or more.

Total liabilities left by failed companies dropped 50.9% to ¥137 billion, after the year-before figure was boosted by the collapse of a large company.

The number of bankruptcies linked to rising prices climbed 47.4% to 87, mostly in the manufacturing and transport industries, which have many subcontractors. Many small businesses are finding it difficult to pass on higher costs in prices.

Bankruptcies among companies that used an interest- and collateral-free lending program introduced during the COVID-19 pandemic remained on an upward trend, increasing by 15.5% to 67 cases.

By industry, the monthly number of bankruptcies hit a record high of 327 in the service sector. Bankruptcies rose especially among restaurant operators amid labor shortages and rising labor costs.

Bankruptcies increased in all nine regions for the first time in nine months.

Tokyo Shoko Research warned that the number of inflation-linked bankruptcies is likely to rise further as many companies are unable to fully pass on higher costs in prices amid the yen's weakness against the dollar.