Japan sees highest first-half bankruptcies since 2022 as weak yen crushes small businesses

Japan’s weak yen is systematically dismantling the country’s small business sector. Corporate bankruptcies in the first half of the year hit their highest level since 2022, driven largely by a currency that keeps making imports more expensive while the businesses buying them keep getting smaller.

The numbers paint a brutal picture

In fiscal 2025, Japan recorded 10,505 corporate bankruptcies among companies with liabilities of at least 10 million yen. That figure, tracked by Tokyo Shoko Research, represents roughly a 3.6% to 4% increase year-over-year and the highest total in over a decade.

Firms with liabilities under 100 million yen accounted for 76.7% of all bankruptcy cases.

January saw 887 corporate failures, the highest January figure since 2013. April brought 883 cases, a 6.6% annual increase and a 12-year high for the month.

In the first four months of 2026, 88 izakaya went bankrupt. That’s a 54.3% jump year-over-year and the highest figure for that period since 1989.

The yen is the accelerant, not the spark

The Japanese yen has been trading at approximately 160-plus to the US dollar, turning every barrel of imported oil and every shipment of raw materials into a significantly larger expense. Foreign exchange interventions from April to May 2026 reportedly totaled a record 11.7 trillion yen, roughly $73 billion, aimed at propping up the currency.

Labor shortages caused a record 397 bankruptcies in 2025 alone.

Pandemic safety nets are gone

During COVID, Japan rolled out extensive support measures for struggling businesses, including essentially zero-interest loans and relaxed repayment terms. Those programs kept many firms alive that might otherwise have failed. Now those measures have largely expired, and the businesses they propped up are facing a post-support reckoning.

Services, construction, and manufacturing are all disproportionately affected. The Bank of Japan’s gradual shift toward higher interest rates adds another layer of pressure, as even modest rate increases can be destabilizing for businesses that built their financial structures around the assumption that borrowing would always be essentially free.

What this means for investors

Investors may want to scrutinize their exposure to domestically focused Japanese equities, particularly in services and construction. Currency traders should be watching the Bank of Japan’s policy signals, given that the record-setting FX interventions suggest authorities are increasingly uncomfortable with the yen’s weakness, but intervention alone hasn’t been enough to reverse the trend.

For crypto-adjacent investors watching macro flows, Japan remains one of the world’s largest creditor nations, and Japanese institutional capital flows into everything from US Treasuries to global equities. If domestic economic stress forces repatriation of capital or shifts in allocation strategy, the ripple effects would extend far beyond Tokyo.

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