Japan Business Failures Linked to 2011 Earthquake and Tsunami

The March 2011 triple disaster of earthquake, tsunami and nuclear reactor meltdowns has led to 1,485 Japanese company bankruptcies over the past three years, 3.8 times more than the 394 firms that went under over three years as a result of the 1995 Great Hanshin Earthquake, according to a credit research agency.

Teikoku Databank reported many firms were hit by indirect factors, such as deterioration in consumer sentiment or disrupted distribution networks, rather than by direct disaster-caused damage to their business facilities.

The 2011 disaster affected a wider area than the Hanshin quake, and many companies gave up their businesses even after resuming operations, the research firm added. While the pace of business failures is slowing, it will likely be at least two or three more years before the series of bankruptcies related to the disaster eventually finishes, it said.

“Many companies were about to get out of cashflow problems thanks to a law to grant a debt repayment moratorium for small and mid-size companies. But they ended up failing as their clients were taken away by their rivals before they could resume business,” said a Teikoku Databank official. “Even now, around 25 companies go belly-up each month.”

Total debts of the collapsed firms amounted to 1,462.7 billion yen (JPY), 13 times more than the JPY112.6bn in unpaid business debts after the 1995 disaster that ravaged Hyogo Prefecture and surrounding districts in western Japan.

Business failures after the 2011 triple disasters also affected 21,262 employees, according to Teikoku Databank.

Of the 1,485 failures, 142 resulted from the nuclear disaster at the Fukushima Daiichi power plant in Fukushima Prefecture. More than 80% of these companies suffered from rumors about the safety of their products in the wake of the radiation leak.

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