The number of corporate bankruptcies in Japan rose 11.6% in the first half of 2008 with the number of cases related to higher material prices hitting a record high, researchers said today.
Bankruptcies for the first six months totaled 6,022, while combined liabilities climbed 17.4% to 3.019 trillion yen ($28 billion dollars) compared with the same period last year, Teikoku Data Bank said.
June saw 1,065 bankruptcies leaving liabilities of at least 10 million yen each, up 7.1% from 994 cases in May, the research firm said in its monthly report. However, combined liabilities in June were down 1.9% from the previous month to 471.92 billion yen, but were still 40.3% up from the same period last year, it said.
Bankruptcies in construction stayed at a high level due to declining orders for public works and rising material prices, the report said.
The number of business failures related to the recent surge in raw materials costs reached a record high of 54 cases in June, when oil prices hit a record high of 140 dollars, up 40% since early 2008, it added.
Corporate failures are expected to continue to increase and the pace accelerate, which will severely impact small and mid-sized firms, the research firm said.
Japan has since 2002 been in its longest post-war economic expansion, but that "is about to end," Teikoku Data Bank said. "In addition to the construction industry, small retailers are expected to face a period of tough conditions... as recent consumer surveys show household spending expected to decline," it added.
"Demand from overseas is falling, meaning more manufacturers are expected to go out of business."
Top Japanese executives are at their most pessimistic in almost five years as soaring costs, a slowing global economy and a stronger yen pile pressure on profits that are expected to drop this year, the central bank said last week.