Japan saw a significant increase in corporate bankruptcies, marking the highest level in a decade, a local credit research company reported.
Driven by high inflation and labor shortages, the number of corporate bankruptcies across the country surpassed 5,000 for the first time in a decade during the April-September period, according to the latest data released by Tokyo Shoko Research Ltd.
Yoshihiro Sakata, manager of Tokyo Shoko Research's information department, said that compared to the same period last year, the number of business failures due to labor shortages increased by 80.4 percent this year, indicating a rapid escalation in the impact of labor shortages. Additionally, the devaluation of the yen has resulted in increased cost of raw materials and energy.
"Taking a ramen shop as an example, the prices of main ingredients like flour have increased. However, if the price of ramen is directly raised, customers may reduce their consumption, making it difficult for many restaurants to pass the rising costs on to consumers. This leads to a decline in profit margins. Eventually, some shops end up closing due to the inability to withstand cost pressures. This situation is not unique to ramen shops, and the entire restaurant industry is facing similar issues," he said.
Lin, who has been running a restaurant in Japan for 13 years, said that due to the increase in raw material prices and labor costs, the profit margin of his shop is much lower than before.
"In the beginning, when we first started, raw material prices weren't so high, and the labor costs weren't so high either, so the profit margin was much higher than it is now. Currently, the profit is indeed lower than before," Lin said.
Due to the continuous rise in prices in Japan, many restaurants have to increase menu prices to sustain their operations.
"In January this year, there was a rise in price, by around 20 percent, not across the board but for some items. We raised prices by 20 to 30 percent. However, costs have increased significantly this year, so we anticipate another price increase in January next year," Lin continued.
At present, according to Yoshihiro Sakata, the phenomenon of business failures has increased in various regions of the country. While government support can to some extent reduce the number of business failures, long-term reliance on external assistance is not a sustainable solution, he noted.
"Some businesses with strong capabilities manage to survive, while others find themselves in dire straits. This phenomenon is widespread across various regions in Japan and is becoming increasingly apparent. The primary reason for business closures is typically not poor performance or bad debts but rather insufficient funding. Ultimately, businesses need to stand on their own feet, relying less on external aid, to truly achieve sustainable development," said the manager.
Corporate bankruptcies soar in Japan
