Japan bankruptcies rise, worse to come

Mitsuo Suzuki, Reuters, Tokyo

Nearly 10,000 Japanese companies went bankrupt in the past six months, a year-on-year rise of two percent, as limp demand and a stricter approach by banks to foreclosing on debt-ridden firms took their toll, data showed on Monday.

Private research firm Teikoku Databank said the number of corporate bankruptcies stood at 9,665 cases for the half year to September, the third highest level for a six-month period.

Total debts held by companies that went bust during the period fell 33.6 percent from a year ago to 7.24 trillion yen (US$59.8 billion). That was the first year-on-year fall in two years, but was still the fourth-largest figure since World War Two.

Teikoku warned corporate failures would remain high in the coming months with no sign of any quick economic recovery and with banks being pressed hard to tighten their drills in extending any fresh loans to shaky borrowers.

"The Japanese economy is falling into a deflationary spiral. The air attacks in the United States and U.S.-led military strikes on Afghanistan have increased concerns about a simultaneous global recession," Teikoku Databank said.

"Bankruptcies among small- and medium-sized firms are expected to increase further," it said.

Japan's fourth-largest supermarket operator Mycal filed for court protection from creditors in September with 1.39 trillion yen in liabilities, making it Japan's fourth-largest corporate failure in the post-war era.

Mycal's failure came after its creditor banks led by Dai-Ichi Kangyo Bank -- a member of the world's biggest bank Mizuho Holdings Inc. -- decided to withdraw their support.

The failure helped trigger a stunning 287.7 percent rise in total debt held by firms that went under in September alone. The debt totaled 3.00 trillion yen -- the second largest for any September month in the post-war period.