Japan bankruptcies up 5.27% in November, government to buy 2 trillion yen in commercial paper?

December 11, 2008
By Ken Worsley

On Monday, Tokyo Shoko Research released Japan’s November bankruptcy data, which showed an increase of 5.27% from last year to 1,277 cases. Liabilities stood at about 576 billion yen, which was up 16.9% from a year ago, though down 42.8% from October.

With the bankruptcy filing of real estate developer Morimoto in late November, the number of publicly listed firms having gone bust so far this year reached 30, which is the highest figure seen since the end of the war. 23 of the 30 listed firms that have gone under so far this year have been in the construction and real estate industries. Morimoto filed for bankruptcy despite turning a profit in its most recent earnings term.

As firms desperately seek to keep credit lines open, loans from commercial banks increased 3.6% in October, and the government is reportedly considering a plan that would allow the Development Bank of Japan to buy up to 2 trillion yen in commercial paper. At the same time, the government is expected to announce early next week that it will extend credit lines of up to 2 billion yen to small and medium sized real estate developers, through the Japan Housing Finance Agency.

Thursday’s Nikkei had a comment on the impact of poor risk disclosure on investors:

Insufficient, or even nonexistent, corporate disclosure of risk factors that could have a negative impact on business are having serious repercussions for investors and business partners. Although firms have since fiscal 2003 been required to disclose such risks, the recent spate of surprise bankruptcies shows that the system needs revamping.

Although the Nikkei notes that expected risks, such as exchange rates, interest rates, materials costs and changes in demand are often cited by firms in their risk disclosure, some other interesting risks have been put forth. Softbank, for example, lists “contingent events involving President Masayoshi Son” as a risk to investors, while delivery firm Yamato Holdings referred to the “trend toward reconsidering the traditions of giving mid-year and year-end gifts.”

Filed Under Bankruptcy, Business, Economic Reports