Japan Corporate Bankruptcies Hit 13-Year High

Corporate bankruptcies in Japan are rising as businesses face mounting economic pressure from weak sales and persistent labor shortages. According to research firm Tokyo Shoko Research, 851 companies with liabilities of at least ¥10 million filed for bankruptcy in February 2026.

This marks the highest number recorded for the month of February in 13 years. The figure represents an increase of 11.3% compared with the same period a year earlier and the third consecutive monthly rise in corporate failures.

Weak sales remain the primary cause of bankruptcies

Sluggish sales were the leading cause of business failures. In 625 cases, or about 73.4% of all bankruptcies recorded in February, declining revenue was the main factor behind the financial collapse.

Many companies are struggling to generate sufficient income to offset rising operating costs. Small and micro businesses are particularly vulnerable because even modest declines in demand can significantly affect their financial stability.

Service sector records the largest increase

The service sector saw the sharpest rise in bankruptcies. The number of failed companies in this industry jumped 30.9% year-on-year to reach 309 cases.

The construction and transportation sectors also recorded increases in business failures compared with the previous year. These industries tend to be highly sensitive to cost pressures, demand fluctuations and labor availability.

Labor shortages increasingly linked to bankruptcies

Labor shortages have become an increasingly important factor behind business failures. Tokyo Shoko Research reported 47 bankruptcies directly linked to workforce shortages in February, more than double the 19 cases recorded a year earlier.

Japan’s labor shortage is driven by demographic changes, including an aging population and the retirement of experienced workers. At the same time, rising wages are increasing operating costs for companies already facing declining profitability.

Small businesses account for most failures

Total liabilities of bankrupt companies amounted to approximately ¥133.16 billion, a decrease of 22.2% compared with the previous year.

Nearly 80% of bankruptcies involved companies with debts below ¥100 million, indicating that most failures occurred among small businesses and microenterprises.

Rising energy costs could worsen business conditions

Economic risks for Japanese companies may increase further as global energy prices rise. Oil prices have been climbing amid escalating military tensions in the Middle East.

Tokyo Shoko Research warns that higher energy prices will increase operating costs across a wide range of industries. For companies already facing declining profitability due to inflation and weak demand, this could create additional financial strain.

As experts at International Investment report, the increase in corporate bankruptcies reflects a combination of structural challenges facing Japan’s economy, including demographic pressures, labor shortages and rising costs. The resilience of small businesses will remain a key indicator of the country’s economic stability in the coming years.