Bankruptcies topped 5,000 cases for the first time in a decade between April and September, a report by Tokyo Shoko Research showed earlier this month. Those 5,095 firms collectively account for almost ¥1.38 trillion yen in debt, with the largest slice coming from the service industry.
One of them is HIS Co., one of the country’s largest travel agencies. The Tokyo-based company posted ¥1.4 billion in operating profit in its latest fiscal year, which ends in October, but spent ¥1.5 billion on net interest expenses. Others include the plastics recycling company Eco Research Institute Ltd., medical device supplier Hokushin Medical Co. and Asahi Food Create Ltd., which sold pre-prepared food.
Debt-laden companies in Japan are rapidly growing in number, in some measures even faster than in 1992 after the collapse of its asset price bubble. Zombie companies accounted for 14% of listed firms in Japan, according to Tokyo Shoko Research. When a small or mid-sized firm goes under, their employees are let loose, free to find work elsewhere, hopefully at a company that’s more profitable, productive and better at balancing its books. If anything, it’s a natural if not intended byproduct of the BOJ’s rate hikes, one could that help counteract an ongoing labor shortage as the country’s population ages and shrinks.