Tokyo, Mar 13: Japan Inc is set to suffer a record level of bankruptcies in the business year ending this month and the situation may only get worse, a leading credit research firm said on Friday.Total debts held by Japanese companies going bust will rise to 13.5 trillion yen ($104 billion) in the 1997/98 year to March 31, a record for the third straight year, Tokyo Shoko Research predicted in its monthly report.
The number of corporate bankruptcies for the year is seen totalling 17,300, it said.
"The corporate business situation is getting harsher day by day," Rokuro Kuroda, a senior researcher at Tokyo Shoko, said.
He said the bankruptcy debt may swell to another record in the next fiscal year starting on April 1, possibly as high as 16 trillion yen.
The number of bankruptcies may also grow to more than 20,000, he said. Kuroda said the Asian economic turmoil would start to take its full toll, especially of firms heavily invested in the region, and the domestic economic climate remainedfragile."The decline in the economy is accelerating, whilebankruptcies are spreading into all sectors," Kuroda said.
"There are no sectors that can take the initiative in sparking a corporate recovery, which was the role played by the auto and electronics sectors in 1984," Kuroda said.
"Now, the whole industrial complex is sinking."
In February alone, total bankruptcy debt soared 41.1 percent from a year ago to 1.05 trillion yen, the highest-ever level for that month.
The number of corporate bankruptcies grew 29.4 percent to 1,586, the second-highest level for the month after 1,639 in February 1984.
February marked the 14th straight month of year-on-year rises in the number of bankruptcies. They included the failure of Daido Concrete Co, the first listed Japanese company to go bust this year.
Companies were also hurt by a credit crunch because banks had become more selective in making loans ahead of the introduction of a stricter bank supervision system in April.
Analysts said the injection ofpublic funds of about two trillion yen into the banking sector to help mitigate the crunch would do little to change the tight lending policy of Japanese banks.
"There are fears that firms highly dependent on funds from others will be in a difficult situation now," Tokyo Shoko said in the report.
Those still saddled with debt from the asset-inflated "bubble" era of the late 1980s face a risk of liquidation as creditor banks encounter difficulties in cooperating with each other to help such firms, the report said.
"The introduction of Japan's `Big Bang' Financial reforms could even make things worse," Kuroda said. After Japan lifts restrictions on currency trading next month, banks may experience a rapid outflow of savings deposits from individual and corporate clients, he said.
Given Japan's ultra-low interest rates, people may tend to invest in overseas products with higher yields. Companies may also shift deposits to foreign banks from domestic ones, a move that would further increase banks'difficulty in raising money in the money markets and in turn make them more cautious about lending to companies, Kuroda said.
Tokyo Shoko said bankruptcies triggered by the weak economy, such as those prompted by sluggish sales, accumulated losses and difficulty in collecting accounts receivable totalled 981 cases in February, or 61.8 percent of the" total bankruptcies in all sectors posted double-digit year-on-year growth in February, with those in the construction sector rising 25 percent to 445 cases, the report said.
