Japan's bankruptcies may rise on stronger yen, Tokyo Shoko says

“If the yen's appreciation continues, it will hit domestic demand-based industries,” Tomoda, a senior manager of information at the credit and bankruptcy research firm, said in an interview in Tokyo today. “While personal spending is in a slump amid deflation, companies such as retailers and services industries may struggle to survive.”

A stronger yen weighs on prices by making imports cheaper, forcing domestic producers to discount goods to avoid losing customers. That may choke growth by squeezing corporate profits, leading to wage cuts that will further damp consumer demand in the world's second-largest economy.

The Japanese currency traded at 85.99 per dollar at 3:48 p.m. in Tokyo, after climbing to 84.83, the highest since July 1995. The Nikkei 225 Stock Average slid 3.2 percent, its biggest drop in eight months.

The yen's advance has exacerbated concerns about the stability of Japan's recovery from its worst postwar recession. The government last week said Japan was in a “mild deflationary phase.” Price declines blighted Japan during its so-called lost decade of stagnation after an asset bubble burst in the early 1990s.

Japanese corporate bankruptcies fell for a third month in October as measures by the government and the Bank of Japan helped companies get funding. Business failures dropped 11.8 percent from a year earlier to 1,261 cases, Tokyo Shoko said on Nov. 10.

Toward December, bankruptcies may fall as the government is working on legislation for a moratorium on loan repayments by small businesses, which may compel lenders to ease their stance on repayment, Tomoda said.

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