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Japan bankruptcy

debt climbs to

record high

TOKYO: Total debt at bankrupt Japanese companies rose 32.7 percent to a record high in the fiscal year that ended in March, fuelled by a series of major failures at financial firms, a private research company said on Monday.

Tokyo Commerce and Industry Research Co said that despite signs the economy was recovering from a five-year slump, conditions remained tough and bankruptcies were likely to continue increasing.

"The government has declared that the economy is recovering, but overall bankruptcies are fluctuating monthly and are still in a rising trend," it said in a report.

The report said although the key barometer on the Tokyo stock market, the Nikkei average, had recovered to above 20,000 points and exchange rates had stabilised, other problems continued to undermine the economy, including unemployment, domestic political instability and uncertainty about the health of foreign economies.

Bankruptcy debt totalled 8.63 trillion yen ($79.1 billion) in the fiscal year, exceeding the previous record of 8.14 trillion yen ($74.6 billion), which was marked in the 1991/92 fiscal year when Japan's economic "bubble" of inflated land and stock prices had begun collapsing. This figure refers to the amount of debts held by firms that went bankrupt in the period.

The number of bankruptcies in the 1995/96 year rose 6.7 percent to 15,162 cases, the highest level in nine years. The construction sector was particularly hard hit, recording a 16.3 percent rise in the number of bankruptcies during the year.

Many of the largest bankruptcies were those of non-bank financial institutions which lent heavily to property projects during the boom years and were then saddled with huge amounts of bad debt as the real estate market collapsed.

The single biggest failure of the year was Hyogin Factor, a non-bank with 369.2 billion yen ($3.39 billion) in debt. Hyogin was dragged down in the collapse of affiliate Hyogo Bank, the first commercial bank to fail since World War Two.

Bankruptcies are defined as insolvent companies in the process of liquidation or reorganisation under court protection from creditors. The report covered bankruptcies with debt totalling at least 10 million yen ($92,000).-Reuter