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October bankruptcies jump 13.4% to five year high

November 14, 2008
By Ken Worsley


According to data released Wednesday by Tokyo Shoko Research, the number of bankruptcies in Japan involving firms with at least 10 million yen in capital rose by 13.4% in October to hit 1,429.

The number of bankruptcies increased in nine of 10 sectors surveyed, as the construction industry led the way with 402 firms having gone bust in October. In six of the 10 sectors, bankruptcies showed a rise in the double digits when compared to a year ago. Making matters seem even more dire is the fact that eight publically listed firms went bust in October, which is an all-time high.

Although overall bank loans increased 1.6% in September, loans to small and medium sized firms declined 3.2% from last year. Difficulty in securing funds, as well as expectations of continued slowdowns in consumer spending and wage growth, makes it difficult to predict that the rising number of bankruptcies is a trend that will be reversed soon.

Looking across the pond, the bankruptcy of Circuit City in the US has further spooked Japanese electronic manufacturers, as has the profit warning issued by America’s largest electronics retailer, Best Buy. Circuit City apparently owes Sony alone somewhere along the lines of $60 million.

Filed Under Bankruptcy, Business 

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Comments

One Response to “October bankruptcies jump 13.4% to five year high”

  1. Ken Worsley on November 14th, 2008 11:02 pm

    More on the effects of the bankruptcy of Circuit City and its effect on Japanese electronics manufacturers:

    http://www.nni.nikkei.co.jp/AC/TNKS/Nni20081112D12HH716.htm

    Not only is a key North American sales channel in danger, the bankruptcy may intensify price-cutting competition among local retailers, slashing profit margins at the manufacturers even further

    Sony Corp. apparently has about 60 million dollars in claims against Circuit City, but its problems go deeper than that. The retailer’s bankruptcy means that Sony’s sales channel for high-end products may have been damaged just before the lucrative holiday sales season…

    … As the financial crisis deepened, however, prices of such TVs began falling faster, and sales of other digital electronics, such as cameras, also started taking a hit from deteriorating consumer sentiment. Struggling makers and retailers are competing to present the most attractive prices, offering large discounts usually only seen during the holiday season.

    Circuit City’s collapse will only intensify this competition, as manufacturers and store operators expect the retailer to offer extreme discounts to make quick cash…

    …Electronics companies are also concerned that the bankruptcy may, in the long run, make retailers more powerful. It is common in the U.S. for electronics makers to give retailers substantial sales incentives or other payments in the hope that their products will be placed in favorable locations in stores…

    … Even after Circuit City’s bankruptcy filing, Best Buy will likely continue the price competition because digital home appliances are now being sold by other types of retailers as well, including Wal-Mart and Costco Wholesale Corp.

    The latest drama in the U.S. electronics market could deal another blow to Japanese manufacturers, which are already reeling from stagnant demand and the stronger yen.

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