'The Takaichi Fallout': Rising bankruptcies test Japan's economy

Japan's small and micro-sized firms are being squeezed by labor shortages and rising costs, with "the Takaichi Fallout" prompting fresh questions about whether Japan's new Prime Minister Sanae Takaichi's fiscal approach can offer relief. Analysts say the mounting pressure highlights deeper structural weaknesses in the economy, and may be adding to what can be described as Japan's rising "Takaichi-cost."

Japan recorded 5,172 corporate bankruptcies with liabilities of at least 10 million yen ($64,305) in April-September 2025, up 1.51 percent from a year earlier and the highest for the period in 12 years, Tokyo Shoko Research said. Failures have now risen for four straight years, with small firms bearing the brunt of higher wages and operating costs.

Companies with liabilities below 100 million yen made up over 70 percent of all the cases – the highest share in three decades – highlighting the fragility of Japan's smallest operators. Labor shortages triggered a record 202 failures, including firms citing soaring labor costs, hiring difficulties and staff departures.

Inflation-linked bankruptcies reached 369, extending a three-year climb as the weak yen pushed up prices of imported food, energy and other essentials, hitting domestic-demand sectors such as restaurants.

Service industries logged the most failures at 1,762, followed by construction, which is grappling with elevated material prices and worker shortages.

The latest monthly data points to further deterioration. October saw 965 bankruptcies, up 6.2 percent year on year, marking the fifth straight month of annual increases and the highest monthly total so far this year, with small firms employing fewer than 10 people accounting for roughly 90 percent of the cases.

Tokyo Shoko Research warned that most small businesses lack the ability to pass on higher costs, leaving them increasingly exposed. The agency expects bankruptcies to exceed 10,000 again this year.

As "the Takaichi Fallout" continues to ripple through industries and everyday life, Japan's rising "Takaichi-cost" is becoming harder for policymakers, businesses – and the people who depend on them – to overlook.