Business / Economy

Japan bankruptcies seen rising to seven-year high amid pandemic

by Ayai Tomisawa

Bloomberg

Companies declaring bankruptcy in Japan will likely climb to the most in seven years in 2020, further pressuring an economy hurt by the coronavirus pandemic.

That’s the view of Tokyo-based Teikoku Databank Ltd., which is forecasting that such cases may exceed 10,000 this year, the highest since 2013. Bankruptcy protection filings jumped to 758 in April, with 123 of those caused by factors related to the pandemic, as the outbreak forced hotels and restaurants to close their doors, according to the major credit research firm that compiles Japan corporate failure data.

“This feels worse than the global financial crisis,” said Yuya Akama, general manager of the information department at Teikoku Databank’s Tokyo head branch, in an interview. “There are concerns across sectors like department stores, hospitals, airlines, hotels and tourism bus operators and restaurants.”

A global economic slowdown triggered by the COVID-19 pandemic is causing companies to go out of business around the world, threatening the livelihood of workers. Prime Minister Shinzo Abe doubled Japan’s stimulus measures this week to support the economy, which analysts forecast may shrink by more than 20 percent this quarter.

Companies, and small to midsize firms in particular, should accumulate funds not just to override the crisis for the time being but to be prepared for a second wave, Akama said.

“It’s possible that there may be another state of emergency from the government if there is a second or a third wave,” Akama said. “Moreover, recovery may take longer than expected, and may stretch through a second wave.”

Among Japanese enterprises filing for bankruptcy linked to the coronavirus outbreak, hotels and inns, restaurants and clothing retailers were especially prevalent, according to Teikoku Databank data. Renown Inc., a Tokyo-listed apparel company, filed for creditor protection this month after sales plummeted due to the pandemic.

Many company owners may elect to go out of business without filing for bankruptcy protection, and those cases may also climb in the current environment to around 25,000 this year from less than 24,000 in 2019, according to Akama at Teikoku Databank.

Akama said that he was based in Japan’s northeast in 2011 when a massive earthquake devastated the area, and he saw the damage it caused to local businesses. This crisis is different, he said.

“The coronavirus pandemic isn’t just a Japan-specific matter, but a global issue hitting the entire world economy — it’s unprecedented,” Akama said.

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