Japan Corporate Bankruptcies on Track to Top 10,000 in 2025 as Small Firms Face Cost Pressures and Labor Gaps

Why bankruptcies are rising again

Japan is on track for a second straight year with more than 10,000 corporate bankruptcies. Credit researcher Tokyo Shoko Research counted 9,372 failures from January through November 2025, each with liabilities of at least 10 million yen. The current pace means the 2025 tally is likely to pass the 10,000 mark again. That threshold was cleared in calendar 2024 for the first time in 11 years, and fiscal 2024 (April 2024 to March 2025) finished at 10,144. Rising input costs, a weak yen and a chronic labor shortage are the common threads in many recent failures. The pressure is most intense on small and midsized companies that have limited ability to pass higher costs to customers.

November brought a brief easing in the case count. There were 778 failures that month, down 7.5 percent from a year earlier. Total liabilities tied to November bankruptcies fell 48.6 percent to 82.4 billion yen after the number of larger failures with debts of 500 million yen or more was cut in half. The services sector still logged the most cases in the month with 250.

What the latest data shows in 2025

From April through September 2025, failures reached 5,172, the highest first half in 12 years, according to Tokyo Shoko Research. The trend has been upward for four consecutive years. Monthly readings have been volatile. Teikoku Databank reported 835 cases in May, the first decline compared with a year earlier after a long stretch of increases. September produced 873 cases, October rose to 965, then November dipped to 778. The year to date total of 9,372 through November keeps the full year on course to exceed 10,000.

The standard definition used by the major credit agencies counts failures with debts of at least 10 million yen, a level that filters out very small closures. Even within that definition, recent data show a shift toward smaller firms and smaller liabilities per case. That is why the total amount of debt in bankruptcy can fall while the number of cases climbs.

Which industries are under the most pressure

Service businesses are bearing the brunt. Restaurants, bars, hotels, personal services and other local demand operators face higher food and energy costs and intensifying wage competition. In calendar 2024, the services sector recorded more than 3,300 bankruptcies, an increase from the previous year. In November 2025 services accounted for 250 cases, still the largest share despite a decrease compared with a year earlier.

Construction has emerged as the second major trouble spot. Material costs remain elevated and staffing is tight. New overtime limits have made scheduling more difficult and expensive. The construction tally in 2024 rose to just under 1,950 cases. Manufacturing failures also increased as parts and energy bills climbed. Transportation showed some relief last year as more operators passed costs to clients, but the margin for error remains thin in logistics, retail and real estate.

Why inflation and a weak yen are still biting

Inflation linked bankruptcies have risen again in 2025. Tokyo Shoko Research attributes 700 cases in the first eleven months to price pressures, an increase from a year earlier. A weaker yen has made imported fuel, food and basic materials more expensive in local currency. That squeeze is severe for businesses that pay in yen but buy inputs priced in dollars or euros.

Many small suppliers and storefront businesses lack the bargaining power to raise prices quickly. Larger customers often resist price revisions or delay them. Cash buffers are thin. Even modest increases in utility bills and wholesale prices can push a fragile balance sheet into insolvency. The result shows up as more cases with relatively small liabilities, even as the total yen amount tied to bankruptcies trends lower than past spike years.

Labor shortages deepen the strain

Japan is contending with a tight job market, an aging workforce and changing work rules. Failures that cite workforce shortages surged to a record pace in the first half of fiscal 2025, with more than 200 such cases. In calendar 2024 these labor related failures climbed to 289, the highest in years. Small employers report losing staff to larger rivals that can offer higher pay and better conditions. In service industries, operators that cannot hire or retain staff cut hours and lose sales, which worsens cash flow.

Business succession is a parallel challenge. In 2024, 462 bankruptcies were tied to the inability to find a successor. Owners approach retirement with no family or buyer in place and rising compliance and payroll demands. Some shut down without formal bankruptcy, while others reach the courts when debts cannot be met. The combination of rising wages, worker shortages and succession gaps weighs heavily on regional economies with many small firms.

Credit conditions after the pandemic and rate normalization

Emergency programs from the pandemic era are winding down. Interest free, unsecured loans that helped keep firms alive during 2020 and 2021 are now being repaid or refinanced. In fiscal 2024, 529 bankruptcies involved companies that had received those loans, a sign of mounting strain as repayments come due. Tax deferral measures ended, adding to monthly obligations for small companies that had relied on that relief.

Japan’s central bank has begun a cautious shift away from very low rates. Policymakers watch bankruptcy data along with wages and prices to gauge the economy. The path of rates matters for smaller borrowers that face higher interest expenses when credit is rolled over. Even with low headline rates by global standards, tighter credit screens and higher risk premiums can tip a marginal business into failure. Tokyo Shoko Research has highlighted the rising share of small cases, which lowers the average debt per failure while lifting the case count.

Regional and size patterns

Trends vary by region and by month. Teikoku Databank reported that in May 2025 seven of nine regions had fewer bankruptcies than a year earlier, with the Kanto area logging the most cases and Chugoku showing the largest decrease. That respite did not last, as the national totals for the summer and early autumn moved higher before the November dip.

The profile of failing firms points to fragility among the smallest operators. Companies with fewer than 10 employees made up close to nine in ten cases in 2024. A large majority of 2025 failures involved debts under 100 million yen. These are familiar corner shops, small contractors and micro manufacturers that keep local economies running. Their finances are highly sensitive to energy prices, delivery rates and supplier terms.

What to watch next

Seasonal cash flow swings can be severe for small firms. Year end bonus payments, winter utility bills and slow customer payments often converge in December and January. If the yen strengthens and imported energy costs ease, pressure could abate. If price pass through gains traction in supplier contracts, more firms can stay current on wages and debt.

Three signposts stand out. First, wage settlements at smaller companies in the next labor talks will show whether pay gains are spreading beyond large exporters. Second, the pace of cost increases for food, energy and construction materials will shape margins at service and building companies. Third, credit conditions, from bank lending attitudes to government backed refinancing schemes, will determine how many troubled firms can bridge to a recovery in demand.

Key Points

• 9,372 corporate bankruptcies were recorded from January to November 2025, pointing to a full year total above 10,000 for a second year.
• November cases fell 7.5 percent from a year earlier to 778, and total liabilities that month dropped 48.6 percent to 82.4 billion yen.
• Fiscal 2024 ended with 10,144 bankruptcies, the most in 11 years, while calendar 2024 finished at 10,006.
• Services continue to see the most failures, with 250 cases in November and more than 3,300 in calendar 2024.
• Inflation linked failures totaled 700 in the first eleven months of 2025, lifted by higher import costs from a weak yen.
• Labor shortages reached record levels as a cause of failure, with more than 200 cases in the first half of fiscal 2025 and 289 in 2024.
• Most bankruptcies involve small firms with limited ability to pass on higher costs, which lowers average debt per case.
• Pandemic era supports are fading, and repayments on interest free loans are pressuring cash flows at vulnerable firms.
• Bank of Japan policy, wage trends at smaller companies and energy price movements are key variables to watch in early 2026.