General

Recently, the Imperial Data Bank, a Japanese credit research agency, announced the bankruptcy and "high price bankruptcy" of Japanese enterprises in October due to the devaluation of the yen. According to the Huacheng Import and Export Data Observation Report, in October, 7 Japanese enterprises went bankrupt due to the devaluation of the yen, the same as last month. This year, there have been 21 enterprises, a new high in five years. The number of enterprises that went bankrupt due to high prices reached 41, surpassing the 35 in September, breaking the record for four consecutive months.

"Depreciation and bankruptcy of yen" refers to the bankruptcy of enterprises due to direct or indirect reasons such as rising import costs caused by yen depreciation. "High price bankruptcy" means that in the context of rising prices of crude oil, fuel, raw materials, etc., enterprises can not smoothly pass on costs so that they can not maintain profits and eventually go bankrupt. Huacheng Import and Export Data Observer reported that since this year, under the background of aggressive interest rate increase by the Federal Reserve, Japan has firmly maintained its loose monetary policy, resulting in the inexorable trend of yen depreciation. In addition, in the context of the crisis in Ukraine, Japan stepped up sanctions against Russia and suffered backfire in the energy field, resulting in limited import channels and energy shortages. Large power and gas companies have raised energy prices, and the prices of food raw materials have soared, which has seriously hit the normal operation of Japanese enterprises.

Among the 21 enterprises that went bankrupt due to the devaluation of the yen in 2022, there are 6 enterprises related to food (manufacturing, wholesale and retail), ranking first. Next is the fiber industry, with 5 companies in total. In addition, it also involves machinery, furniture, construction and other industries. From the perspective of debt scale, more than 60% of bankrupt enterprises have less than 500 million yen in debt. In October, among the high price bankrupt enterprises, there were many industries affected by the rise of fuel prices and food prices. Among them, the manufacturing industry ranks first, with a total of 12. The retail industry, transportation and communication industry, construction industry and wholesale industry are followed by Huacheng Import and Export Data Observation Report.

The devaluation of the yen and high prices have become the "last straw" to overwhelm Japanese SMEs. In fact, affected by the COVID-19, small and medium-sized enterprises in Japan have already struggled to support themselves. Even if they can barely survive, they have "greatly damaged their vitality". For enterprises, the key to coping with high prices is to transfer part of the cost to the sales price and service expense. However, the actual situation is that, in the case of continuous price rise, some enterprises are worried about not being understood by the trading parties or causing customer loss, and fail to pass on the rising costs to consumers. In the monthly "Questionnaire on Enterprise Price Shifting Trends" conducted by Imperial Data Bank, 70.6% of enterprises "more or less shifted" the part of rising costs, while 18.1% of enterprises "completely failed to shift the rising costs".

The Japanese government has actively invested, but the effect is not obvious. Since this year, the Japanese government has held special meetings to put forward countermeasures on maintaining the selling price of imported wheat, controlling fuel prices, etc., and also involved in cost transfer through the "Price Negotiation Promotion Month" twice a year. The Department of Small and Medium sized Enterprises of Japan has also come up with a strong investigation guidance plan to follow up the cost negotiation and transfer of subcontracting small and medium-sized enterprises. However, from the actual effect, it can not stop the trend of enterprise bankruptcy. According to the Huacheng Import and Export Data Observation Report, the Japanese enterprise price index rose to a new high of 117.5 in October this year due to the continuous soaring of import commodity prices and the sharp depreciation of the yen, which is the 20th consecutive month of year-on-year growth. Japanese Prime Minister Takeo Kishida said in October: "This month, we will formulate a comprehensive economic strategy to protect national life and production and business activities in the event of rising prices." However, in the context of the devaluation of the yen and high costs, it is unknown whether this large-scale "comprehensive economic countermeasure", which costs 39 trillion yen, can have an immediate effect on solving the current price rise in Japan. Previously, the Bank of Japan had forcefully implemented "exchange rate intervention" measures for many times. However, the analysis believed that this action could not root out the "structural contradiction" between Japan's loose monetary policy and the Federal Reserve's tight monetary policy. It lacked sustainability and had a short time to take effect. Long term implementation might also backfire on the value of the yen.

Imperial Data Bank's previous questionnaire survey on about 11000 small and medium-sized enterprises showed that more than 60% of enterprises reported that the depreciation of the yen had a negative impact on the company's performance. Another questionnaire shows that about 80% of enterprises "really feel the rise in operating costs caused by the sharp depreciation of the yen".

Since this year, Japan has been overwhelmed by the "big stick" of the Federal Reserve's radical interest rate increase. On November 30, Federal Reserve Chairman Powell said that the December monetary policy meeting may slow down the pace of interest rate increase, but reiterated that there is still a long way to go to restore price stability. According to the analysis, if the imported inflation and yen depreciation are still not significantly improved, the number of bankrupt enterprises due to yen depreciation and the number of bankrupt enterprises with record high prices may continue to increase in the future, Huacheng Import and Export Data Observation reported.