What will be the impact of more than 1,000 corporate bankruptcies in Japan in May

Affected by various factors such as rising raw material prices, according to the report released by the Tokyo Business & Industry Research Institute, a Japanese private enterprise credit survey agency, the number of Japanese domestic bankrupt enterprises (debts of more than 10 million yen) reached 1,009 in May this year, an increase of 43% over the same period last year, and about 90% of these bankrupt enterprises are small enterprises with fewer than 10 employees. From the perspective of industry distribution, the number of bankrupt enterprises in the service industry and related industries is the largest, reaching 327. This was followed by the construction industry, which also reached nearly 200. Some of the bankrupt companies are unable to pay back the zero-zero loans, which are practically interest-free and unsecured loans, while others are under great pressure due to soaring prices and lack of manpower. Secondly, the depreciation of the yen has also led to higher raw material and energy costs, and some small and medium-sized enterprises have been unable to fully pass this pressure on to the sales end, which is very difficult. According to the survey, the number of bankruptcies in Japan may reach 10,000 in the whole of 2024.

A combination of factors may be responsible for the dramatic increase in corporate failures in Japan. Service sectors such as tourism, catering and retail have been affected by the blockade and reduced consumption, and companies have seen their revenues plummet, making it difficult to repay their debts. In addition, supply chain disruption, increased logistics costs and other issues have also had a negative impact on enterprises to a certain extent. The first is the trade impact, as the number of Japanese companies going bankrupt increases, these companies may reduce or stop their import activities because they need to focus on dealing with debt and restructuring issues, or because they have closed and no longer need to import. Japan is also an important trading partner for many countries, and an increase in bankruptcies could lead to a significant reduction in Japan's import demand, which would reduce the demand for Japanese exports. At the same time, as bankrupt companies need to deal with debt and other issues, they may reduce their investment and procurement in other countries, which may lead to a reduction in Japan's overall import demand, which may have a certain negative impact on Japan's trading partners, and may also have a certain impact on exports from other countries.

The second is the supply chain impact. If the bankrupt enterprises are the key nodes in the supply chain, their bankruptcy may have a chain reaction on the entire supply chain and affect the normal operation of other enterprises. In reality, many Japanese companies play important roles in global supply chains, especially those involved in key industries such as high-end manufacturing, semiconductors, and automobiles. If these enterprises suffer bankruptcy, it is very likely to destroy the stability of the supply chain and affect the smooth progress of global trade. An increase in the number of bankruptcies could lead to higher costs for other businesses in the supply chain, other businesses in the supply chain may need to re-evaluate their supplier relationships, find new partners, and may require supply chain restructuring and reconfiguration.

Third, the employment impact, the increase in the number of bankrupt enterprises may lead to the deterioration of the overall employment environment. There may not be enough jobs to meet the large number of unemployed workers released by bankrupt companies who need to find new jobs, posing a threat to social stability and economic recovery. In particular, those small and medium-sized enterprises that go bankrupt, which are often an important source of employment, will directly lead to the loss of a large number of employees. A rise in bankruptcies could also have a negative impact on worker and investor confidence. If workers are pessimistic about job prospects, they may reduce consumption and investment, which further affects economic growth and job market recovery.

To sum up, the increase in the number of bankruptcies in Japan may have an extremely negative impact on the economy and society, but it also needs to take various factors into account for a comprehensive assessment. Therefore, the government and society need to take effective measures to deal with this problem, such as providing financial support, strengthening job training, and creating job opportunities, so as to promote the stable and healthy development of the job market.