Japan business mood worsens, bankruptcies seen rising as Iran war lifts costs
A man uses a laptop on a street at a business district in Tokyo, Japan, on Jan 23, 2024. (Photo: REUTERS/Kim Kyung-Hoon)
TOKYO: Japan saw corporate bankruptcy cases rise for the fourth straight year in fiscal 2025 and may see further increases from around summer this year as surging costs from the Middle East war squeeze profits, a private think tank said on Wednesday (Apr 8).
A separate government survey also showed business sentiment worsened in March as uncertainty over the Middle East conflict clouded the economic outlook.
"Japan's economic recovery is showing some weakness due to downward pressure from Middle East developments," the government said in the survey released on Wednesday.
Total bankruptcy cases in fiscal 2025, which ended in March, stood at 10,425, up 3.5 per cent from the previous year and exceeding the 10,000 mark for two straight years as firms struggled with rising input costs and labour shortages, Teikoku Databank said.
The data showed companies were under strain from high input and labour costs, even before the US-Israel attacks on Iran on Feb 28 led to an escalating conflict in the Middle East that triggered an oil price surge and supply disruptions.
"There is growing concern among firms about rising input costs as surging crude oil prices have pushed up prices not just for fuel and chemical goods, but for a wide range of items" such as plastic products, construction material and fertilisers, Teikoku Databank said.
"Japan may see a surge in bankruptcies from around summer, leading to a good chance of an increase in bankruptcy cases during fiscal 2026," it said.
A separate government survey showed on Wednesday an index measuring business sentiment fell to 42.2 in March from 48.9 in February. Another index measuring sentiment two to three months ahead also worsened to 38.7 in March from 50.0 in February.
The findings align with a quarterly report by the Bank of Japan's regional branch managers on Monday, which warned that surging oil costs and supply disruptions brought about by the Middle East conflict could hurt the economy.
The balance between such downside risks to growth and mounting inflationary pressure will be key to the BOJ's decision on whether to raise interest rates at its next policy meeting on Apr 27-28.
