Rise in bankruptcies in July signals credit crunch still in effect

Corporate bankruptcies climbed in July, signaling businesses are still struggling to get funding amid the recession.

Bankruptcies climbed 1.02 percent in July from a year earlier to 1,386 cases, Tokyo Shoko Research Ltd. said in a report Monday.

The Bank of Japan decided to extend its emergency-credit programs last month, citing "severe" credit conditions that continue to squeeze businesses. Economists say rising business failures may lead to a further climb in unemployment, which is already close to a postwar high.

"Financial conditions aren't stable yet on the whole," said Masayuki Kichikawa, chief Japan economist at Merrill Lynch & Co. "Corporate funding is improving among large companies, but not yet at small businesses," which account for 70 percent of the workforce, putting pressure on the unemployment rate, he said.

Kousai Jigyo, a subsidiary of Kousai Tetsudou that manages golf courses and real estate leases, filed for bankruptcy last month with ¥22.5 billion in debt.

Still, signs of a recovery have begun to emerge.

Machinery orders, an indicator of corporate spending in the next three to six months, jumped 9.7 percent in June.