Japan Registers Near-Record Corporate Failures Since WWII

By Agence France-Presse The number of Japanese corporate bankruptcies in the first six months of 2002 was the third-highest first-half total since World War II, while the total value of their liabilities was the second worst post-war figure, a research firm said July 12. The number of first-half bankruptcies rose 4.7% from a year earlier to 9,427 cases and total liabilities reached 7,443.9 billion yen (US$63.6 billion), rising 3.2% from the previous year, according to Teikoku Data Bank. The amount of liabilities rose as a number of construction, service and manufacturing firms failed between January through June, it said. Failures of 22 listed companies, including contractor Sato Kogyo Co. and retailer Niko Niko Do Co., also boosted the liabilities total. The lingering sluggishness of the domestic economy was blamed for 75.9% of the corporate collapses, it said. The high figures reflected the fact that the Japanese economy was at its lowest ebb during the period, analysts said. "During the first half of the year, the government announced that the economy was bottoming out. That means the economy was at rock-bottom," immediately before that, said Shinichiro Kobayashi, economist at UFJ Research Institute. "Although the deterioration stopped, it doesn't mean the economy suddenly got better. At that point, the companies that had endured tough times found their financial standing had so weakened they couldn't keep standing." Looking ahead, Kobayashi said he expected the bankruptcy figure to improve somewhat but not dramatically. "As the nation's exports recover, firms in the sector are benefiting. But the majority of Japanese companies are medium to small-size companies that rely on domestic demand. "The bankruptcy figures usually trail the general economic trend. When the economy starts to recover, it takes a while for the bankruptcy figures to follow the trend and to improve," he said. "I would suspect the amount of liabilities might fall, but the number of bankruptcies is likely to remain the same." For June alone, the number of corporate failures fell for the second straight month, Teikoku said. A total of 1,415 companies failed in June, showing a 9.5% year-on-year fall. Copyright Agence France-Presse, 2002

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