Japan’s New Wave: Cash, Bankruptcies and Inequality
Covid-19 will widen the wealth gap. Bigger firms will survive, while the small decide it’s not worth it.
Staying open won’t be an option for many.
Photographer: Viola Kam/SOPA/Light Rocket/Getty
Despite trillions of dollars of stimulus sloshing around and credit being funneled into the global economy, the coronavirus is forcing countless businesses into bankruptcy. The weak are getting weaker, and the big are thrown lifelines. That divide will only grow wider.
The case of Japan, where insolvencies are rising sharply, shows that no matter how much cash you have, size matters more: Micro-enterprises across all sectors account for around 70% of companies going under, despite a large portion having net cash. Almost 60% of small companies in the benchmark Topix stock index are net cash, compared to around 40% of the larger ones. Overall, that’s much higher than global peers: The figures are 15.6% of S&P 500 non-financial companies, and around 23% of the MSCI Euro.