Bankruptcies in Japan jump 34% last month

By Toru Fujioka, Bloomberg

TOKYO — Japan’s corporate bankruptcies jumped 34 percent last month, the fastest pace in eight years, as demand for exports slumped and credit-market turmoil engulfed the world’s second-largest economy. Bankruptcies rose to 1,408 cases in September from the same month a year earlier, Tokyo Shoko Research Ltd. said in a report in Tokyo Wednesday.

That’s the biggest jump since March 2000, when cases rose 38.6 percent, according to Bloomberg data. Japan’s Nikkei 225 Stock Average tumbled 8.7 percent, its biggest rout since October 1987, on concern the global credit crisis will prolong the economy’s stagnation. Corporate failures are rising at the steepest rate since Japan’s banking crisis in 2000 as the credit shortage deprives businesses of cash. “We’re in the middle of a recession,” said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. “Real-estate and construction companies have been in a mini- bubble over the last few years because of all that money coming from abroad. Now that’s withdrawn.” The yen surged beyond 100 per dollar for the first time in six months after a plunge in Asian stocks prompted investors to reduce holdings of higher-yielding assets funded in Japan.

The currency traded at 99.97 per dollar as of 2:55 p.m. in Tokyo. Business failures in the construction industry increased 41 percent in September, Wednesday’s report showed. Human21 Corp. went out of business last month, becoming the fourth-largest publicly traded real-estate company to shut its doors this year, according to data compiled by Bloomberg News. Banks cut lending as growth in Japan’s property market slowed and the collapse of the subprime market in the U.S. kept potential buyers from making acquisitions. Developers are also being squeezed by higher prices for steel and other raw materials used in construction, and by a change in building-approval regulations in June 2007 that slowed applications. The credit crisis is spreading to other industries, with smaller companies saying they are having a harder time securing funds needed to grow at a time when the economy is on the verge of a recession.