Japanese corporate bankruptcies linked to the yen’s slide may accelerate a few months from now, reflecting the latest rapid drop in the currency, said Osamu Naito, a researcher at Teikoku Databank Ltd.
“The recent decline in the yen is too rapid,” Naito said on Tuesday, as the currency traded at the lowest since 2002 versus the dollar. “Further weakness in the yen could become a matter of life and death for many small- and medium-sized companies.”
While corporate bankruptcies overall in Japan decreased in the fiscal year through March, there has been an increase in company failures linked to the yen’s depreciation. It may accelerate from around August through the end of the year and has the potential to “trigger” an increase in the overall number of bankruptcies, said Naito.
Japanese Prime Minister Shinzo Abe and Bank of Japan Governor Haruhiko Kuroda met Tuesday and discussed the global economy amid the currency’s slump. Kuroda, who said they didn’t discuss the yen, told reporters after the meeting that it’s desirable for exchange rates to be stable and reflect a nation’s economic fundamentals.
The yen traded at 124.52 to the dollar at 6:03 p.m. in Tokyo, after earlier touching 125.05, the weakest since December 2002.
There is typically lag of 3 months to 6 months from a currency change to the impact being felt in bankruptcies, Naito said.
Industries that may see increases in business failures due to the yen’s decline include transport, food processors and retailers, as well as firms in the textile and apparel sector, Naito said.
The number of corporate bankruptcies linked to the weak yen more than doubled to 401 last fiscal year, even as overall failures dropped 11 percent to 9,044, according to Teikoku Databank.
There were 35 bankruptcies related to the weaker yen in April. The credit research company, which publishes monthly figures on bankruptcies, will release May data for corporate failures related to the weak yen on June 5.