The number of Japanese corporate bankruptcies linked to the yen’s slide has risen to a record high, highlighting strains on small and medium-sized companies as Japanese Prime Minister Shinzo Abe campaigns for re-election on his economic strategy.
Forty-two of the companies that failed last month cited the weaker currency as a contributor, bringing the total number of bankruptcies associated with the yen this year to 301, almost triple that of the same period last year, according to a survey by Teikoku Databank Ltd.
It said surging costs of imported food, metals and construction materials squeezed small companies.
The yen broke through 120 per US dollar on Thursday for the first time since 2007, as Abe’s handpicked central bank head pumps a record amount of funds into the economy to stoke inflation.
While some small firms struggle to pass on higher costs of imported materials to customers, large exporters are reporting higher profits and the total number of corporate failures is in decline.
“Business conditions for small and medium-sized companies are severe,” Mizuho Securities Co economist Norio Miyagawa said. “The more the yen weakens, the more the drawbacks will become evident, unless the benefits big companies are seeing spill over to consumption through an increase in wages.”
The yen traded at 120.08 against the US dollar at 1:32pm in Tokyo yesterday, after touching 120.25 on Thursday, a level unseen since July 2007.
Bankruptcies linked to the weak yen, especially of small companies and businesses outside large cities, are likely to continue to increase as the currency’s decline following the central bank’s latest monetary easing begins to take a toll early next year, Teikoku Databank said.
The research company began surveying the link between the yen and bankruptcies in January last year.
The broader trend in corporate failures is down. The total number of bankruptcies declined 14 percent from a year earlier in October, to 794 cases, a 15th straight monthly drop, Teikoku Databank said. Further data for last month’s bankruptcies is to be released next week.
Bank of Japan Governor Haruhiko Kuroda on Nov. 25 said that the weak yen tends to boost exports and spur profits for global Japanese companies, while also weighing on small companies and households.
Japanese Finance Minister Taro Aso showed concern about the pace of the yen’s drop, saying on Nov. 21 that the currency was falling too fast, as it raced to its biggest monthly decline since the start of last year.
The government is to take measures to combat the effects of the yen’s decline and to continue to pay close attention to moves in the currency, Japanese Deputy Chief Cabinet Secretary Hiroshige Seko said yesterday.
ADVANCED: Previously, Taiwanese chip companies were restricted from building overseas fabs with technology less than two generations behind domestic factories Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), a major chip supplier to Nvidia Corp, would no longer be restricted from investing in next-generation 2-nanometer chip production in the US, the Ministry of Economic Affairs said yesterday. However, the ministry added that the world’s biggest contract chipmaker would not be making any reckless decisions, given the weight of its up to US$30 billion investment. To safeguard Taiwan’s chip technology advantages, the government has barred local chipmakers from making chips using more advanced technologies at their overseas factories, in China particularly. Chipmakers were previously only allowed to produce chips using less advanced technologies, specifically
The New Taiwan dollar is on the verge of overtaking the yuan as Asia’s best carry-trade target given its lower risk of interest-rate and currency volatility. A strategy of borrowing the New Taiwan dollar to invest in higher-yielding alternatives has generated the second-highest return over the past month among Asian currencies behind the yuan, based on the Sharpe ratio that measures risk-adjusted relative returns. The New Taiwan dollar may soon replace its Chinese peer as the region’s favored carry trade tool, analysts say, citing Beijing’s efforts to support the yuan that can create wild swings in borrowing costs. In contrast,
TARIFF SURGE: The strong performance could be attributed to the growing artificial intelligence device market and mass orders ahead of potential US tariffs, analysts said The combined revenue of companies listed on the Taiwan Stock Exchange and the Taipei Exchange for the whole of last year totaled NT$44.66 trillion (US$1.35 trillion), up 12.8 percent year-on-year and hit a record high, data compiled by investment consulting firm CMoney showed on Saturday. The result came after listed firms reported a 23.92 percent annual increase in combined revenue for last month at NT$4.1 trillion, the second-highest for the month of December on record, and posted a 15.63 percent rise in combined revenue for the December quarter at NT$12.25 billion, the highest quarterly figure ever, the data showed. Analysts attributed the
Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) quarterly sales topped estimates, reinforcing investor hopes that the torrid pace of artificial intelligence (AI) hardware spending would extend into this year. The go-to chipmaker for Nvidia Corp and Apple Inc reported a 39 percent rise in December-quarter revenue to NT$868.5 billion (US$26.35 billion), based on calculations from monthly disclosures. That compared with an average estimate of NT$854.7 billion. The strong showing from Taiwan’s largest company bolsters expectations that big tech companies from Alphabet Inc to Microsoft Corp would continue to build and upgrade datacenters at a rapid clip to propel AI development. Growth accelerated for
RSS