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Fri, Mar 15, 2002 - Page 21 News List

Bankruptcies on the rise in Japan

BLOOMBERG , TOKYO

Japanese bankruptcies rose for a sixth month in February and may climb to a record this year as banks clear trillions of yen of bad loans from their books by shutting off deadbeat borrowers.

A total of 1,674 companies went bust last month, up 14.6 percent from a year ago, Tokyo Shoko Research Ltd said. The failed companies owed ?1.25 trillion (US$9.67 billion), the credit researcher said.

The record-setting pace of bankruptcies -- an average 60 firms went bust each day last month -- threatens to drive up the nation's jobless rate and depress bank earnings as lenders take charges for loans that won't be repaid.

"Writing off bad loans is a no-brainer, not just a necessity," said Akihiko Suzuki, an economist at Sanwa Research Institute Corp. "This will push the bankruptcy and jobless rate higher, but it has to be done."

Nine publicly traded companies have gone bust already this year, compared with 14 for all of last year. Nakamichi Corp, which makes top-end audio equipment, filed for bankruptcy last month because of concern Bank of Tokyo Mitsubishi Ltd and Fuji Bank Ltd would follow its other two big lenders, Dai-Ichi Kangyo Bank Ltd and Asahi Bank Ltd, and cut off credit.

Nakamichi, which employs 48 people, had debts of ?20 billion, about half of which was owed to the four banks.

Construction company Sato Kogyo Co earlier this month filed the biggest bankruptcy case this year, as government cuts to public works spending ate into revenue. The company, which has lost money in six of the past seven years, had debt of ?450 billion and more than 3,000 employees.

Tokyo Shoko and Teikoku Data Bank, which also tracks corporate failures, have forecast bankruptcies this year will top last year's 17-year high of 19,164 as the world's second-biggest economy struggles to emerge from recession. The economy shrank 1.2 percent in the fourth quarter from the previous quarter, the third decline in a row.

"It's almost guaranteed that we will exceed 20,000 bankruptcies this year," said Katsuyuki Kumagai, general manager of the information department at Teikoku Databank. "The bigger question is by how much."

Among Japan's biggest employers, 512 construction companies failed, a 6.9 percent gain and 339 manufacturers went bust, a 26.5 percent increase. One hundred and ninety three retailers went bankrupt, a 7.8 percent increase. The rising number of bankruptcies is taking a toll on lenders.

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