Tokyo Shoko Research forecasts that the number of corporate bankruptcies in Japan will exceed 10,000 in 2024, reaching the highest level in 11 years.
Bankruptcy Cases Surge with Over ¥2 Trillion in Liabilities
According to data released by Tokyo Shoko Research, the total number of corporate bankruptcies in Japan reached 9,164 between January and November 2023, a 16.2% increase from the same period last year. Total liabilities amounted to approximately ¥2.15 trillion (about $13.6 billion at an exchange rate of ¥158 to the dollar). The agency projects that bankruptcies will exceed 10,000 in 2024, marking the first time since 2013—when the number hit 10,855—that annual bankruptcies surpass this threshold.
Small Businesses Dominate Bankruptcies, Struggling to Survive
Over 70% of the companies projected to go bankrupt in 2024 have liabilities under ¥100 million, with the majority being small and micro enterprises. Tokyo Shoko Research notes that these businesses mainly depend on domestic demand and have difficulty passing rising costs onto consumers amid sluggish recovery and rising prices. Other contributing factors include heavy debt burdens, labor shortages, and rising labor costs.
Cautious Optimism for Economy Amid Global Risk
According to Kyodo News, Japan’s economy is expected to continue moderate growth into 2025, fueled by wage hikes and government stimulus measures that are expected to support consumption. However, analysts warn that if Donald Trump returns to the U.S. presidency, his protectionist trade stance could pose downside risks to Japan’s economy.
OECD Forecasts 1.5% Growth in 2025
The Organisation for Economic Co-operation and Development (OECD) forecasts Japan’s economy will grow by 1.5% in 2025, driven by rising wages and increased corporate investment. Personal consumption accounts for more than half of Japan’s GDP. However, rising prices have strained household finances, making wage growth in 2025 critical for improving consumer sentiment. Real wages failed to rise consistently in 2024 and are expected to remain under pressure in 2025.
Government Launches ¥39 Trillion Stimulus to Support Consumption
To boost consumer spending, the Japanese government introduced a ¥39 trillion stimulus package for the 2024 fiscal year (through March 2025), including energy subsidies and cash handouts for low-income households. Analysts believe real wages may begin to recover in the second quarter of 2025 as energy prices stabilize and the spring wage negotiations are expected to deliver substantial pay increases.
Labor Union Demands Over 5% Pay Raise for 2025
The Japanese Trade Union Confederation (RENGO) plans to demand a wage increase of over 5% during the 2025 spring wage negotiations. The union especially aims to secure wage hikes of more than 6% for workers at small and medium-sized enterprises (SMEs), which employ about 70% of Japan’s labor force and have historically seen lower wage growth than large corporations.
Uncertainty for Exports as Industrial Output Declines
Japan’s Ministry of Economy, Trade and Industry (METI) reported that industrial production, shipments, and inventory indices all declined in November 2023 due to weakening exports of semiconductor manufacturing equipment and automobiles. The industrial production index fell 2.3% month-on-month to 101.7. Out of the 15 industries included in the index, 11 saw production declines, 3 increased, and 1 remained flat.
Foreign Workers Play Increasing Role Amid Worsening Labor Shortages
With Japan’s aging and shrinking population, labor shortages are becoming more severe. A recent survey by the Ministry of Health, Labour and Welfare revealed that about 65% of companies in Japan employ foreign workers to address labor shortages. Additionally, 56.8% of firms said foreign workers perform as well as or better than their Japanese counterparts, highlighting the growing importance of foreign labor in the Japanese workforce.
