Japan experienced over 10,000 corporate bankruptcies in fiscal 2025 for the second consecutive year, as small and medium-sized firms struggled with rising prices and persistent labor shortages, according to a survey by Tokyo Shoko Research released Wednesday [1]. Specifically, bankruptcies involving debts of at least 10 million yen increased by 3.6 percent year-on-year to 10,505 cases, with companies employing fewer than 10 people making up approximately 90 percent of the total [1]. Despite the rise in bankruptcies, total liabilities fell sharply by 33.9 percent to 1.57 trillion yen [1].
Regionally, seven out of Japan's nine regions saw increases in bankruptcies compared to the previous year, while only the Tohoku and Chugoku regions reported declines [1]. The survey highlighted that bankruptcies attributed to high prices surged 13.9 percent to 801 cases, and those caused by labor shortages reached 442, including 195 due to rising labor costs and 139 from a shortage of job applicants [1].
The service sector was hit hardest, recording 3,585 bankruptcies, a 5.5 percent increase, followed by the construction sector with 2,047 cases. Five out of ten industry sectors saw year-on-year increases in bankruptcies [1]. Monthly data for March showed bankruptcies rose 8.3 percent from a year earlier to 924, marking the fourth consecutive monthly increase [1].
An official from Tokyo Shoko Research warned that the disparity between firms is likely to widen, and companies lacking sufficient funds may be eliminated, especially amid concerns over oil supply disruptions linked to the Middle East war [1].
CONCLUSION
Japan's corporate sector, particularly small and medium-sized firms, continues to face significant challenges from rising prices and labor shortages, resulting in a sustained increase in bankruptcies. The trend is widespread across most regions and industry sectors, with ongoing risks highlighted by credit research officials. The market outlook remains cautious, with further eliminations possible among financially vulnerable companies.