Bankruptcy filings in Japan reached a concerning 11-year high in fiscal 2024, totaling 10,144, according to a report released Tuesday by credit research firm Tokyo Shoko Research (TSR).
The surge in bankruptcies comes amid growing uncertainty surrounding the Bank of Japan’s (BOJ) interest rate hike schedule, adding to the economic pressures facing Japanese businesses.
The data indicates that the number of bankruptcies in the 12 months leading up to March was the highest since fiscal 2013, when 10,536 filings were recorded, and represents a 12% increase from the previous year.
TSR’s analysis revealed that most industries, with the exception of financial and transportation sectors, experienced a rise in bankruptcies compared to the previous year, highlighting the widespread nature of the economic challenges.
Overall debt declines despite higher filing numbers
Despite the increase in filings, the total amount of debt involved in bankruptcies decreased from 2.46 trillion yen in fiscal 2023 to 2.37 trillion yen ($16.08 billion) in fiscal 2024, according to TSR.
This apparent paradox suggests that relatively more small- and mid-sized firms entered bankruptcy, contributing to the higher number of filings while lowering the overall debt burden.
The largest single debtor was the former Mitsubishi Aircraft Corp, which was liquidated last year with a substantial 641 billion yen in debt following the termination of the Mitsubishi SpaceJet commercial airplane project, a major blow to Japan’s aerospace ambitions.
BOJ watch: bankruptcy data as a key economic indicator
Bankruptcy data is one of the key indicators closely monitored by BOJ policymakers to assess the overall health of the Japanese economy.
Governor Kazuo Ueda has stated that the central bank will continue to raise interest rates if sustained wage increases, including those at smaller firms, support consumption-led economic growth, making the current surge in bankruptcies a potential cause for concern within the BOJ.
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