Nearly 36,000 Japanese firms shut down business due to COVID-19

Nearly 36,000 Japanese firms shut down business due to COVID-19

TOKYO – Nearly 36,000 Japanese companies have chosen to discontinue their business so far this year, mainly due to the hit from the coronavirus crisis and up sharply from a year ago in a sign of the pain the pandemic is inflicting on the fragile economy.

The total number of companies closing businesses, without going through bankruptcy procedures, may top 53,000 by year-end. That would be the most since relevant data became available in 2000, Tokyo Shoko Research said on Wednesday.

“With the pandemic expected to be prolonged, an increase in companies that discontinue business is unavoidable,” the think tank said in a report.

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The number of companies that discontinued business stood at 35,816 from January through August, up 23.9% from the same period of the previous year, according to the report. That would make up roughly 1% of the 3.58 million firms in Japan.

Of the total, 31% were service-sector firms, followed by construction firms at 18% and retailers at 13%, the report said.

The government and the central bank have deployed various measures since March to ease corporate funding strains, which have helped keep bankruptcy numbers largely unchanged from the previous year’s levels, the report showed.

But some companies are struggling to stay alive not because of a cash crunch but diminishing prospects of a pick-up in demand, it said.

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Japan suffered its biggest economic slump on record in the second quarter as COVID-19 hit demand. Analysts expect growth to rebound only modestly in the current quarter as the pandemic keeps households and companies from boosting spending.

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