Rapid Rise in Japanese Bankruptcy Cases in 2022 Despite COVID-19 Loan Support

There has been a rapid increase in the number of bankruptcies among companies in Japan that received “zero-zero loans,” which were special effectively interest-free, unsecured loans that were introduced to support small and medium-sized businesses during the COVID-19 pandemic.

A survey by Teikoku Databank showed that, in 2021, in the range of 10 to 20 companies a month went bankrupt after receiving COVID-19 financing. In total, 167 went under that year. Since March 2022, the number of such bankruptcies rose to more than 30 a month, leading to a total of 384 cases for the whole year, a 2.3-fold year-on-year increase.

Based on the disclosed size of loans for approximately 180 companies, the average loan amount came to around ¥59 million. Initially, the majority of loans involved were provided by government-affiliated financial institutions. However, from 2022 onward, there was a visible rise in bankruptcies among companies that had received loans from private financial institutions, including banks and credit unions. As a result, the total cumulative loss from these COVID-19 loans is estimated at ¥33.5 billion.

By industry, construction was the worst hit by bankruptcies in 2022, with a threefold increase to 85 cases. The wholesale and manufacturing industries also suffered with 76 and 65 cases, respectively. Among the 58 retailers who went bankrupt, 27 were restaurants.

The survey conducted in August 2022 revealed that around 30% of companies were scheduled to start repayments of their COVID-19 loans from 2023 onward. Teikoku Databank indicated that the burden of repayment will be much heavier for small and medium firms, along with microenterprises, who have been slow to recover, so there are concerns that bankruptcies will further increase.

(Translated from Japanese. Banner photo © Pixta.)