Japan Bankruptcies: Updated July 8, 2024.

 

Japan corporate bankruptcies hit 10-yr-high amid labor shortage

Article Source:  https://mainichi.jp/english/articles/20240705/p2g/00m/0bu/037000c

Ideas:

The weak Japanese yen might have something to do with the number of bankruptcies and it causes increased prices related to needed raw materials and energy costs for businesses.

Of course Japan is in a significant labor shortage and if some companies, such manufacturing companies can't get the workers then need to run the machines they lose production and lose orders and it eventually builds up.

And then there is the idea that maybe just maybe some young Japanese workers don't want to work in some occupations, and those companies are having a hard time finding suitable workers.

But there is always the idea of bringing in foreign labor, but it takes a time get them trained and or have the needed Japanese language skills to do the work.

Labor shortages might not be the most significant variable as the weak yen, increasing prices seems to be the main engine for bankruptcies, and then there is the idea that small and midsized companies might not be able to pass-on their costs, and some large companies might reject the higher prices.

But at the weak yen, persists, and inflation keeps increasing the profit margins of some companies just can't keep up and they get deeper and deeper in a hole.

As soon as they increase prices, and their profit margins are now more safe, inflation increases, and their profit margins, again, are compromised, and again, they have to pass-on even more costs to the next in the supply chain, and so it goes over the past few years since the pandemic.

The construction industry, might be having challenges with labor shortages, as again, maybe some younger Japanese workers don't want to work in the construction industry.

At the same time the construction industry might be experiencing increased raw material costs due to the weak Japanese yen.

And of course, as the Japanese government attempts to rein in too much overtime work, maybe some construction companies are not able to meet the new regulations.

Most likely large-scale bankruptcies occurred during or after the pandemic and what bankruptcies there are not are more likely related to the weak Japanese yen, and increased raw material prices.

The Japanese stock market, like the US stock market, and other stock markets are not representative of most of the Japanese economy and what is going on in the Japanese economy.

And yes, there are positives and some negatives related to the weak Japanese yen and one major negative is small Japanese companies have been unable to overcome the weak Japanese yen, and or able to pass-on their costs to the next in the supply chain.

Most likely the small Japanese companies might have been suppliers to larger companies and the weak Japanese yen, increased their raw material costs and they were not able to keep up with inflation and unable to pass-on their costs to the next in the supply chain an or large companies rejected the price increases of the small companies.

Public financial aid, while good and needed, for a market economy to keep moving forward, but at the same time, too much financial aid increases the government debt and someday someone has to pay, such as maybe in the future, pension payments might be reduced.

Also, unfortunately, bankruptcies could be seen as a normal part of a market economy, as some companies with excellent demand for their products prosper and some companies don't do so well.

Of course even good companies with excellent products and good demand go bankrupt for a number of reasons, such  the weak Japanese yen, labor shortages, changes in regulations and so on..

Have a nice day and be safe!