Business failures in Japan fall 14% in 2010 but debt amount rises

TOKYO, Jan. 13 Kyodo -
Corporate bankruptcies in Japan in 2010 fell 13.9 percent from a year earlier
to 13,321 for the second consecutive year of drop, slipping below the 14,000
line for the first time in four years, but the amount of debts left by the
failed firms rose due to a series of failures of big firms, such as Japan
Airlines Corp., a credit research firm said Thursday.
Tokyo Shoko Research also said the yen's steep appreciation against major
currencies dealt a hard blow to a greater number of companies, with a total of
75 companies, a roughly 3.4-fold increase from the previous year, going under
mainly because the strong yen deteriorated their earnings.
A total of 26 companies also went bust as a faster-than-expected rise in the
yen caused huge losses in their holding of financial instruments, despite their
aim of hedging against the risk on foreign exchange rate moves.
While the drop in 2010 failures was attributable to government measures such as
an emergency loan guarantee system and other financial aid for small
businesses, the pace of decline in corporate failures slowed toward the end of
the reporting year as the effects of the government's measures were fading,
according to the credit research agency.
The loan guarantee system for small companies will be scaled down in April and
the government's incentive program for the purchase of environmentally friendly
consumer appliances is set to end in March.
''The current situation does not allow us to anticipate a sharp recovery of the
economy,'' an official of the research firm said. ''If there are no additional
supportive measures, the number of corporate failures in 2011 may surpass the
level of the previous year.''
Liabilities that accompanied the corporate failures totaled 7.16 trillion yen
in 2010, up 3.3 percent from a year earlier. Seven cases of large-scale
failures, which left behind at least 100 billion yen in liabilities each,
accounted for more than half the total debt amount.
Of the seven, the three biggest failures were JAL and its two units, with 2.32
trillion yen in debts, Incubator Bank of Japan with 680.5 billion yen in
liabilities, and consumer loan firm Takefuji Corp., which had 433.6 billion yen
in debts.
The research firm said recession-linked factors, such as a sales slump and the
inability to collect payments, accounted for a record-high 82.9 percent of all
failures.
By industry, the real estate sector saw a 26.0 percent drop in the number of
the industry's corporate failures to 441, the sharpest drop among the ten
surveyed industries, followed by the financial and insurance sector and the
wholesale sector. The construction sector saw a 13.7 percent drop to 3,523, its
lowest level since 1994.
The agriculture, forestry, fishery and mining sector was the only sector that
saw a rise in corporate failures, marking a 20.7 percent gain to 93.
In December alone, corporate failures declined 2.9 percent to 1,102, marking
the 17th consecutive month of decline. Their combined debts fell 16.6 percent
to 246.48 billion yen.
Teikoku Databank, another private credit-research firm, said 11,658 companies
went under in 2010, down 12.4 percent, accompanied by debts totaling 6.94
trillion yen, up 1.9 percent.
The surveys by the two firms cover business failures with 10 million yen or
more in debts. The report by Teikoku Databank covers only corporate failures
filed with courts.
==Kyodo