[Teikoku Databank Co., Ltd.] The number of bankruptcies was 746, exceeding the same month last year for 28 consecutive months, the highest number in August in the past 10 years – Nationwide corporate bankruptcies tally August 2024 report
*Teikoku Databank Co., Ltd.*
Press release: September 9, 2024
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The number of bankruptcies was 746, exceeding the same month last year for 28 consecutive months, the highest number in August in the past 10 years – Nationwide Corporate Bankruptcy Calculation August 2024 Report *Total debt was 92,759 million yen, lower than the same month last year for the first time in two months*
photo by PIXTA
Teikoku Databank Co., Ltd. compiled and analyzed the number of corporate bankruptcies (covering legal liquidations with debts of 10 million yen or more) in August 2024.
-Overview-
1. Number of bankruptcies* 746 (742 in the same month last year, 0.5% increase)*
This was an increase over the same month last year for 28
consecutive months. For August, this was the highest number in the past 10 years, exceeding the previous year (742).
2. Total debt* 92,759 million yen (99,501 million yen in the same month last year, 6.8% decrease)*
This is the first time in two months that it has fallen below the same month last year. The top debt was 10.947 billion yen for Kure Service Co., Ltd. (formerly Kanda Shipbuilding Co., Ltd., Hiroshima Prefecture, special liquidation), which manufactured and repaired steel ships.
-Main points-
1. By industry, three out of seven industries exceeded the same month last year. * “Service industry” (187 cases → 197 cases in the same month last year, 5.3% increase)* was the most common. In terms of growth rate, *
“Wholesale trade” (79 cases → 96 cases, 21.5% increase)*
was the highest. Food-related bankruptcies were noticeable, with increases in “restaurants” (56 → 72) under “retail” and “food and beverage wholesale” (13 → 32) under “wholesale”.
2. By region, sales exceeded the same month last year in 5 out of 9 regions. The highest number of cases* “Kanto” (294 cases → 279 cases in the same month last year, 5.1% decrease)*
was below the same month last year for the first time in 19 months. The area with the highest increase rate was * “Shikoku” (12 cases → 18 cases in the same month last year, 50.0% increase) *
This is the first time in five months that the increase rate has exceeded 50%. The cumulative total for January-August 2024 has already exceeded the number of cases in 2023 as a whole in five prefectures. 3. There were 41 cases of “bankruptcies after zero zero (corona) financing,” which was lower than the same month last year for the first time.
4. There were 22 cases of “labor shortage” bankruptcies, which was lower than the same month last year for the first time in four months. 5. There were 13 cases of bankruptcies due to nonpayment of taxes and public dues, doubling from the same month last year.
6. 64 cases of “high price bankruptcies” occurred, exceeding the same month last year for 30 consecutive months since March 2022 Collection period: August 1, 2024 to August 31, 2024
Announcement date: September 9, 2024
Target of calculation: Bankruptcies due to legal liquidation with debts of 10 million yen or more
Aggregation organization: Teikoku Databank Co., Ltd.
*Survey results are also posted on the website below.
https://www.tdb.co.jp/tosan/syukei/index.html
■ By industry * 3 out of 7 industries exceeded the same month last year. “Retail” exceeded the same month last year for 24 consecutive months*
By industry, three out of seven industries exceeded the same month last year. * “Service industry” (187 cases → 197 cases in the same month last year, 5.3% increase) * was the most
“Retail industry” (148 cases → 169 cases, 14.2% increase) * , * “Construction industry” (148 cases → 122 cases, 17.6% decrease) * followed. “Retail” has exceeded the same month of the previous year for 24 consecutive months since September 2022 (108 cases). * “Transportation/Communications” (31 cases → 28 cases, 9.7% decrease) * was lower than the same month last year for the second consecutive month. Looking at the rate of increase, * “Wholesale trade” (79 cases → 96 cases, 21.5% increase)* had the highest rate.
Looking at the industry in detail, in the “retail industry” where the number of cases increased the most, “restaurants” (56 cases → 72 cases in the same month last year) saw a significant increase. In “Wholesale trade,” “Food and beverage wholesale” (13 cases → 32 cases) increased, and food-related bankruptcies were noticeable. In addition, in the “service industry”, “medical industry” (9 cases → 15 cases) increased.
■ * “Recession-type bankruptcies” numbered 620 cases. Main causes other than “recession-type” were lower than the same month last year*
Looking at the main causes, “sluggish sales” was the most common at 613 (565 in the same month last year, an increase of 8.5%), accounting for 82.2% of the total (6.1 points increase compared to the same month in the previous year). Looking at the breakdown by industry, the “service industry” (132 cases in the same month last year → 161 cases) had the largest number, followed by “retail industry” (120 cases → 147 cases in the same month last year). The total number of
“recession-type bankruptcies,” including industry slumps (7 cases → 4 cases, 42.9% decrease), was 620 cases (575 cases, 7.8% increase), exceeding the same month last year for 28 consecutive months.
The number of cases of “loose management” (down 30.8%, from 13 cases in the same month last year to 9 cases) fell below 10 cases for the first time in seven months. In addition, the main causes other than “recession-type” such as “Other business plan failures” (32 cases → 27 cases, down 15.6%) were lower than the same month last year. *Among the main causes of bankruptcies, poor sales, poor exports, difficulty in collecting accounts receivable, accumulation of bad debts, and slump in the industry are counted as “recession-type bankruptcies.”
■By type of bankruptcy * 847 bankruptcies, exceeding the same month last year for 28 consecutive months*
By type of bankruptcy, there were 724 “liquidation-type” bankruptcies (730 in the same month last year, down 0.8%), accounting for 97.1% of the total (down 1.3 points compared to the same month last year). There were 22 “revival-type” bankruptcies (12 cases, an increase of 83.3%), exceeding the same month last year for the second consecutive month.
Among “liquidation type” cases, “bankruptcy” was the most common at 693 cases (703 cases in the same month last year, down 1.4%), but it was lower than the same month last year for the first time in 2 years and 5 months. There were 31 cases of “special liquidation” (27 cases, an increase of 14.8%), which exceeded the same month last year. In terms of “rehabilitation type,” there were 21 cases under the “Civil Rehabilitation Act” (12 cases, an increase of 75.0%), an increase of over 70% for the first time in 10 months. Of these, 19 were individuals and 2 were corporations.
■* Debt “less than 50 million yen” was the most common, accounting for 63.4% of the total, the highest composition ratio in the past three years*
Looking at debt size, “less than 50 million yen” was the most common at 473 cases (433 cases in the same month last year, an increase of 9.2%), accounting for 63.4% of the total. Since September 2021, the composition ratio has been the highest in the past three years. “100 million yen or more and less than 500 million yen” followed with 156 cases (156 cases in the same period). There were 88 cases of “50 million yen or more and less than 100 million yen” (113 cases, down 22.1%), the first time in about three years that the rate of decline exceeded 20%.
By capital size, there were 529 bankruptcies involving individuals with capital of less than 10 million yen (491 in the same month last year, an increase of 7.7%), accounting for 70.9% of the total.
■By business history * 286 cases of “emerging companies” exceeded 200 for 10 consecutive months for the first time in 12 years*
By business history, “more than 30 years” was the most common, with 229 cases (228 cases in the same month last year, an increase of 0.4%), accounting for 30.7% of the total. Of these, there were 11 bankruptcies of long-established companies (more than 100 years of business history).
“Emerging companies” with business history of less than 10 years (“Less than 3 years” – 25 cases → 37 cases in the same month last year, 48.0% increase -, “Less than 5 years” – 47 cases → 47 cases -, “Less than 10 years” – (130 cases in the same month last year → 154 cases, 18.5% increase)) was 238 cases (202 cases in the same month last year, 17.8% increase). It was the 30th consecutive month that sales exceeded the same month last year, making it the longest period of increase since 2000. Looking at the breakdown by industry, “Service industry” (70 cases → 89 cases, 27.1% increase) was the largest, “Retail industry” (43 cases → 59 cases, 37.2% increase), and “Construction industry” (34 cases) (→43 cases, 26.5% increase). * ■By region 5 out of 9 regions exceeded the same month of the previous year “Kanto” fell below the same month of the previous year for the first time in 19 months *
By region, sales exceeded the same month last year in 5 out of 9 regions. The area with the highest number of cases was * “Kanto” (294 cases in the same month last year → 279 cases, 5.1% decrease) * However, it was below the same month last year for the first time in 19 months. Of these, two prefectures increased: Tochigi (4 cases → 12 cases) and Kanagawa (50 cases → 56 cases). *
“Chubu” (79 cases → 100 cases, 26.6% increase) * “Mie” (8 cases → 15 cases) increased.
The area with the highest increase rate was *Shikoku (12 cases → 18 cases in the same month last year, an increase of 50.0%)*, exceeding 50% for the first time in five months. Then *
In “Tohoku” (36 cases → 49 cases, 36.1% increase)*, there was a noticeable increase in “Fukushima” (5 cases → 12 cases). On the other hand, * “Hokkaido” (24 cases → 16 cases, 33.3% decrease) *
The decline rate exceeded 30% for the first time in three years since August 2021.
In the cumulative total from January to August 2024, five prefectures have already exceeded the total number of cases in 2023.
*Notable bankruptcy trends*
■* Bankruptcies after Zero Zero (Corona) financing 41 cases occurred in August 2024, lower than the same month last year for the first time*
There were 41 cases of “bankruptcy after zero zero (corona) financing” (62 cases in the same month last year, a decrease of 33.9%), which was lower than in the same month last year for the first time.
Additionally, the average amount of zero-zero loans borrowed by the approximately 520 companies for which the actual loan amounts were known was approximately 58 million yen. The total loss of zero-zero loans, which corresponds to “bad loans,” is estimated to be approximately 101,019 million yen, which means that each citizen will be burdened with approximately 840 yen.
■* Labor shortage bankruptcies 22 cases occurred in August 2024 The cumulative total for January-August is the highest pace ever* There were 31 cases of “labor shortage” (14 cases in the same month last year, an increase of 121.4%), doubling from the same month last year. The cumulative total for January-July 2024 was 213 cases, which is significantly higher than the record high for the same period last year (124 cases). By industry, “construction industry” (12 cases) and “service industry” (10 cases) stand out, accounting for 70% of the total.
■* Bankruptcies due to non-payment of taxes and public dues 13 cases occurred in August 2024, the highest pace ever*
There were 13 cases of “bankruptcies due to nonpayment of taxes and public dues” (5 cases in the same month last year, an increase of 160.0%), doubling from the same month last year. The cumulative total for January-August 2024 was 113, significantly exceeding the record high for the same period last year (82). If the number of cases continues at this pace, it is expected that the number of cases will exceed the number for all of 2023 (123 cases) in September. By industry, “Transportation/Communications” (6 cases) had the highest number of cases.
■* Bankruptcies due to high prices (inflation) 64 cases occurred in August 2024, 12 cases of “price increase difficult type”*
There were 64 cases of “high prices bankruptcies” (61 cases in the same month last year, an increase of 4.9%), exceeding the same month last year for 30 consecutive months since March 2022. By industry, “Manufacturing” (14 cases) had the largest number, followed by “Construction” (13), “Wholesale” (11), “Retail” (11), and
“Transportation/Communication”. (11 cases) followed. Additionally, there were 12 bankruptcies where companies were unable to pass on price increases and ended up going bankrupt.
Future outlook
* “High prices bankruptcies” at record high pace, with over 10% of companies “unable to pass on price changes at all” *
According to Teikoku Databank’s “Actual Survey on Price Pass-through (July 2024)” announced on August 28, the “Price Pass-through Ratio”, which indicates the degree to which cost increases are passed on to sales prices, has reached an all-time high. It turned out that the percentage was 44.9%. Although the pass-on is progressing little by little, with an increase of 4.3 points from the previous survey (February 2024), there is no change in the situation where companies still bear more than 50% of the cost increase, and more than 10% of companies said, “Not at all.” The situation continued, with prices unable to be passed on.
While many companies are saying that it is difficult to pass on higher prices, 64 bankruptcies due to high prices were found in August. The number of bankruptcies is on pace to reach a record high, and 12 of these were “price hike-resistant” bankruptcies, where companies were unable to pass on sufficient price changes and went bankrupt. Roughly 10% of all bankruptcies are due to high prices, and continued vigilance is needed to prevent the impact of soaring prices of various raw materials on small and medium-sized enterprises.
*M&A-related troubles surface, need to be thorough in credit checks* Multiple cases have surfaced in which small and medium-sized enterprises become involved in M&A-related troubles. Specifically, the problem is that companies extract cash and other assets from companies after acquisitions and leave the companies alone without canceling promised management guarantees. In response to this, the M&A Intermediary Association announced on August 26 that it would compile a list of “malicious buyer companies” that aim to revitalize or take over the business of small and medium-sized enterprises, and would share it among its members. On the 30th of the same month, the Small and Medium Enterprise Agency announced the revised contents of the “Small and Medium Enterprise M&A Guidelines.” As M&As among small and medium-sized enterprises increase due to succession issues, it has come to light that several small and medium-sized enterprises have been acquired by unscrupulous buyers and forced into bankruptcy due to asset outflow. In order to avoid getting into trouble unintentionally, it is necessary to take all possible precautions regarding the buyer’s credit check.
*Annual total in 2024 will exceed 10,000, an increase of 20% compared to the previous year*
Following the Bank of Japan’s decision to raise interest rates at the end of July, the financial market, both stock and foreign exchange rates, has remained unstable since August. On August 23, during a closed session of the House of Representatives and the House of Councilors, Bank of Japan Governor Ueda reiterated his intention to raise interest rates further if the economy and prices move in line with the outlook. As the “world of interest rates” continues to expand, it seems inevitable that a certain number of small business operators will be weeded out in the future, as their core businesses have not recovered for many years and are unable to respond to interest rate hikes.
The main domestic and international topics that will be attracting attention for the time being are: 1. Concerns about a slowdown in the U.S.-China economy, 2. Increasing tensions in the Middle East, 3. Domestic ruling and opposition party leadership elections and the next House of Representatives election, 4. The outcome of the U.S. presidential election, etc. can be mentioned. Although none of these will have an immediate effect on the number of bankruptcies, there is a possibility that there will be major changes in the business environment surrounding domestic companies, whether large or small, and related economic policies, so we will keep an eye on them.
There were 746 corporate bankruptcies in August 2024, mainly among small businesses, exceeding the same month last year for 28
consecutive months. There was only an increase of 4 cases (0.5% increase) from the same month last year, and the pace of increase until the previous month had slowed down slightly. In addition to being supported by rescheduling support from financial institutions, this is due to the fact that economic activity slows down in February and August due to factors such as fewer business days and the weather, as the old saying goes, “Nippachi”. This appears to have been influenced by the fact that the number of bankruptcies tends to remain at a lower level than in other months.
As a result, the number of bankruptcies from January to August 2024 was 6,553, an increase of 20.3% over the same period last year (5,449). This has already exceeded the annual total for 2022 (6,376 cases), and is trending at a pace that is 20% faster than the previous year. As the effects of high prices, labor shortages, and additional interest rate increases continue to spread, there are few factors that will cause the number of corporate bankruptcies to decline any time soon, and the annual total in 2024 is expected to exceed 10,000 (2023: 8,497).