The number of corporate bankruptcies in Japan in the first six months of 2023 rose 32.1% from a year earlier to a five-year high of 4,042, as businesses took on increased debt to stay afloat amid the COVID-19 pandemic, a survey by a credit research company showed Monday.
The rise in failures involving liabilities exceeding ¥10 million ($70,000) comes as many companies have begun repaying interest-free and unsecured loans, which lenders extended under a government program in response to the pandemic, Tokyo Shoko Research said.
Rising material and labor costs have also affected businesses, the research firm said.
In total, 322 cases involved companies funded by the emergency program, almost doubling from a year before. Business insolvencies resulting from rising prices were 3.3 times higher, reaching 300, according to the firm.
The number of corporate bankruptcies could increase further, especially among firms that have been slow to recover from the pandemic, the firm said.
The total liabilities left by bankrupt companies fell 45.3% to ¥934 billion in the six months after surging last year due to an extraordinarily large debt held by Marelli Holdings, a major auto parts maker.
The company filed for protection with a court in June last year under the civil rehabilitation law, with debts totaling ¥1.13 trillion.
All 10 industry categories covered by the survey saw an increase for the first time in 25 years, Tokyo Shoko Research said.
The service sector logged the highest number at 1,351 cases, up 36.1%, with many restaurants going out of business after the government ended its pandemic-related financial aid.
The construction industry came second at 785, up 36.3%, as it was hit by rising material costs.