Hit by rising prices, Japanese companies hit an 11-year record for output

Japanese companies are increasingly being hit by rising costs, with bankruptcies in the six months to September the highest since 2013, according to a study.

Some 4,990 companies went bankrupt during the period, up 18.6 percent from the previous year, according to a report released Tuesday by Japanese research firm Teikoku Databank, Bloomberg reported. Since the second half of 2022, the number of bankruptcies in Japan has continued to increase.

The report showed that 472 of the 4,990 companies listed inflation as the main reason for bankruptcy, setting a record high.

Japan's main price gauge has remained at or above the Bank of Japan's 2% target for more than two years as a weak yen inflates the cost of imports of everything from food to energy.

The surge in bankruptcies partly reflects the impact of rising prices, especially among small firms.

The report also said construction, manufacturing and retail were the leading sectors where high costs led to bankruptcies.

In addition to rising prices, a record 163 companies cited labor shortages as the reason they were struggling. Japan's unemployment rate has remained below 3 percent for more than three years, the lowest among advanced economies.

A tightening labor market is putting pressure on companies to raise wages to retain workers, further straining corporate budgets. While some Japanese companies managed to offer workers wage increases of more than 5 percent in salary negotiations earlier this year, many small and medium-sized companies say it is difficult to follow suit.